Financial Planning

Not all stocks pay dividends so an investor should conduct research to find out which do. The dividend will provide a steady stream of income during the period of stock ownership, even if the company does not grow. The amount of dividends paid varies and with the stock market in its current volatile state, investors may be seeking the top yielding stocks that pay dividends.

A stock with a beta lower than one is less volatile than the market, a characteristic of some utility stocks. There are several stocks that have low betas coupled with high yields and these may make a nice investment at this time. They are Annaly Capital Management, Anworth Mortgage Asset Corp., MFA Financial, Frontier Communications, Windstream Corp., Altria Group, and Linn Energy, LLC.

Larger cap companies usually pay out the largest absolute dividends. Funds like WisdomTree LargeCap Dividend adhere to this mentality and the two largest holdings in this fund are ExxonMobil and AT&T. The iShares Dow Jones Select Dividend Index considers absolute dividends but also has additional criteria for inclusion, such as a less than 60 percent average dividend payout ratio and five years of increasing dividends.

Some funds, such as Vanguard Dividend Appreciation ETF and PowerShares Dividend Achievers only include stocks from companies whose dividends have increased for at least ten or more years. A 25-year pattern of increases is required for a stock to be included in the SPDR S&P Dividend fund. This can result in the number of holdings being smaller and too concentrated for some investors.

Some Web sites contain full lists of stocks that pay dividends so investors should read through these to get an idea of what is available. These sites often exclude stocks with yields lower than two percent or higher than 25 percent because they are considered not worthwhile or too risky, respectively. Well-known companies like 3M, Avon Products, Coca-Cola, and McDonald’s can be found on the list of stocks that pay dividends. There are also smaller entities and specialty companies, resulting in plenty of options for investors.