NEW YORK (TheStreet) -- Owning strong companies that distribute above-average dividends when the overall market is moving higher is a powerful way to get free portfolio insurance in case the market takes a breather.
Regardless whether your dividend payers are gaining value, as long as they continue to issue dividends you get paid. Receive enough dividends and your stocks become risk-free cash printing presses once a quarter.
With that in mind, if you can find stocks that pay significant dividends in a bullish trend, you have a recipe to stack the odds in your favor. We don't know what the results will be on any given trade, however, in the same way Caesars (CZR) casino prospers we do our best to gain an edge and let the law of averages work in our favor.
Every week I examine the various characteristics of the hundreds of possible dividend plays. These are my best candidates right now for long-term buy and hold dividend payers based on overall risk, yield, and my outlook on continued appreciation.
Background: Verizon Communications (VZ), formed by the merger of Bell Atlantic and GTE, is one of the world's leading providers of high-growth communications services. Verizon companies are the largest providers of wireline and wireless communications in the United States. Verizon is also the world's largest provider of print and on-line directory information.
Price To Book: 3.5
Forward Estimated Earnings Payout Percentage: 57%
I've featured Verizon's competitor AT&T (T) as a strategic dividend play much more often than Verizon, albeit it doesn't necessarily suggest AT&T is that much better. I don't have Verizon in my area (wireless yet, not landline or Internet) and given the coin flip between the two, I went with the one I know best.
This time, however, Verizon is outshining AT&T based on the many metrics examined, as Bret Jensen pointed out in Real Money.
This stock currently has an annualized dividend of $2.12, yielding 4.5%.
While not the worst it could have been, the shares still lost 3.3% in the last month and are down since the start of the year. I think the dip creates a buying opportunity. Granted, the wireless space is volatile, but that's mitigated through the dividend and overall business.
In the last 12 months, the shares have modestly moved higher. The one-year return is 4.8% before dividends, and the average analyst target price for Verizon Communications is $54.
Also, analysts as a whole like this company. Currently, Verizon Communications has 20 buy recommendations out of 31 analysts covering the company, along with 11 holds, and no analysts recommend selling.
On average, Verizon raises its dividend once a year. This holds true even during 2009 and 2010 when many including banking and real estate companies cut or altogether stopped paying. If you bought Verizon 10 years ago, the dividend was about $1.38 in 2004. It hasn't doubled yet, but it's getting close. That's the power of buying a high yield growing stock.
Short interest above 4% is not enough to sound he alarms, but above 5% it places renewed hesitation in allocating capital in the company. Short-sellers are among the brightest and most informed market participants, and if they turn sour on a company it is likely for a valid reason. If the short interest ascends above 6%, you may want to scrutinize changes within the space. Otherwise, the prevailing 4.2% of the float short is relatively meager and not a major concern.
Background: General Electric (GE) is one of the largest and most diversified industrial corporations in the world. GE products include major appliances, lighting products and power generation and delivery products, among many others.
Forward Estimated Earnings Payout Percentage: 52%
Shareholders receive 88 cents annually in dividend payments. The yield based on a recent price is 3.4%. The dividend has more than doubled since the 2010 when GE cut its dividend because of GE Capital, and is 10% higher since 2004.
GE moves with the market because it's part of so many indexes. Lately GE is offering a discount, a discount that makes it more attractive to me. While the overall market is at all-time highs, GE shares have lost 2.5% in the last month. Compared to this time last year, the shares are higher by 7.2%.
Analysts as a whole like this company and so do I. Currently General Electric has nine buy recommendations out of 17 analysts covering the company, along with 8 holds, and zero sell ratings. The average analyst target price for General Electric is $28.92.
Short-sellers hate GE, and there is almost a consensus that money cannot be made shorting it. Short interest is a non-factor at a rate of 0.8% of the float.
Background: Microsoft (MSFT) develops, licenses, and supports a range of software products and services for various computing devices worldwide.
I like Microsoft, and it's one of my favorite long-term buy and hold stocks. I recently wrote about the end of XP and why it means we should see software upgrades in the pipeline. I also think Microsoft is finally going toe-to-toe with Google (GOOG), with its easy growth.
With all its faults, it's hard to find a better dividend payer. Since I wrote my last dividend article including Microsoft 3 Big Dividend Payers With Rising Share Prices, the shares have climbed about 15%, not bad for six months. Plus shareholders received another 1.5% from dividends.
Microsoft distributes $1.12 a year in dividends for a current yield of 2.9%. That compares to 32 cents regular dividends during 2005.
Shares are not far off from the 52-week highs set in December. Unless we have a market meltdown (which is on my mind), I think we will soon see the previous highs taken out. One catalyst comes from analysts. They haven't been too sweet on Microsoft despite its performance. In fact, I think it's the ho-hum analyst attitude that holds it back.
Most of the analysts are bestowing this company a hold rating: 19 out of 35 tracking are now rendering a hold recommendation, 12 recommend this as a buy and four recommend selling. New investors from a year ago are happy and smarter than some analysts. The shares are 38% above a year ago. Analysts are calling for a price target of $38.60.
Short-sellers aren't buying what the analysts are selling. The last reported short interest is trifling at only 1.2% of the average trading float.
At the time of publication, Weinstein had no positions in securities mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.