Two Dividend Stocks Your Portfolio Hopes You Buy

NEW YORK (TheStreet) -- You want an oversized return -- we all do -- but for some accounts preservation of capital is the primary concern. You don't have to settle for one or the other, though, because many stable companies are paying a high yield dividend and their stock is appreciating also. 


I recently highlighted the massive gains made from Microsoft ( MSFT) in Microsoft Hits 52-Week High, Set to Crush $50. Investors who bought when I suggested the software maker about a year ago are enjoying a 50% return while collecting dividends every quarter. I also suggested  Corning ( GLW) and it's also up about 50% in the last six months.

I still love Microsoft and Corning. If you own either or both, stay the course because I can't think of a reason to exit. I do want to share two companies I follow and are once again on my radar as long-term, dividend-income plays.

INTC Dividend Yield (TTM) Chart


Price To Book: 2.2

Forward Estimated Earnings Payout Percentage: 48%

California-based Intel (INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company isn't always in favor and that's an advantage for investors who want dividend income and have a chance to write covered calls. If you want my exact trade recommendation, be sure to take a look at my Real Money Pro post.

Intel has gained about 35% since I declared it a "buy and forget" stock.

I'm asked about Advanced Micro Devices (AMD) often when discussing Intel. While I won't short it, I've never been able to make the case that it's worth buying. It's a great company with incredible potential, but that's the problem.


AMD rarely seems to execute and capture a leadership role and is perpetually in a me-too status. As a result, the revenue per share is on par with Intel, but margins are sacrificed to achieve sales. Simply put, dollar for dollar, Intel is a better buy.

INTC Revenue (Per Share Quarterly) Chart

Ten years ago in 2004, Intel distributed 16 cents in dividends. This year it's 90 cents for a yield of 3.5%. Even if the stock doesn't rise, the overall yield from the dividend makes it a winner. However, the stock is rising and appreciated 2.3% in the last year.

The average analyst target price for Intel is below the current price at $25.20. If analysts raise their price targets it often becomes self-fulfilling because it raises awareness and enthusiasm.

Another catalyst I really like is the short interest. As the price moves higher, shorts get squeezed, adding jet fuel to a rising stock price. Short interest is at 4.5%.

One note of caution: Short-sellers are the smart money and if short interest grows above 5% it may be time to reevaluate.

INTC Payout Ratio (TTM) Chart


T Dividend Yield (TTM) Chart

Price To Book: 2

Forward Estimated Earnings Payout Percentage: 53%

AT&T (T) is a premier communications holding company. Its subsidiaries and affiliates, AT&T operating companies, are the providers of AT&T services in the United States and around the world.

I like AT&T and Verizon (VZ) as dividend plays and they usually are neck-in-neck as finalists. Verizon rocketed higher after highlighting it in A Pair of Hot Dividend-Paying Stocks to Buy Now but has since cooled. AT&T's chart pattern is unquestionably the stronger of the two and higher yield takes it over the top.

The company currently pays $1.84 per share in dividends for a yield of 5.2%. Meanwhile, in the last month alone, the stock climbed almost 10%. I don't care to chase stocks, but Tuesday is the ex-dividend date and investors that buy on or before Monday are able to capture the next payment.

As I write this, AT&T has nine buy recommendations out of 32 analysts covering the company, 21 holds, and two recommend selling. AT&T is less than a dollar from the 52-week high made in November, while the average analyst target price is $35.58. Expect targets to increase at the rate the shares are climbing.

The short interest is slightly elevated, albeit, not yet enough to make me want to worry about it. Short interest is 3.8%. As long as it stays under 4%, I won't give it much thought.

T Payout Ratio (TTM) Chart


At the time of publication, Weinstein had no positions in securities mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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