Top 10 High Dividend Stocks According to Investors Business Daily

Although it is a little dated, an article at Yahoo! provided by Investors Business Daily has a list of what they consider to be the top 10 rated high dividend stocks.

To get on the list, these high yield stocks must posses the following:

We screened for companies with an annual yield of 3% or higher. In addition, a Composite Rating of 85 or higher was required, ensuring that the stocks on the list are among the top 15% of performers right now. IBD’s Composite Rating identifies stocks with a powerful combination of strong fundamentals and leading price performance in their industry groups.

To ensure that the companies meet all our criteria of strong sales and earning growth, and leading price performance, they must have Earnings Per Share (EPS*) and Relative Price Strength (RS**) Ratings of 70 or higher.

Only stocks with Accumulation/Distribution Ratings of “C” or higher were included in the list. The rating uses a price and volume formula to determine if a stock is under accumulation (buying) or distribution (selling) in the last 13 weeks. A signals heavy buying; E is heavy selling. Price rises on above-average trade help lift the Acc/Dis Rating, while price declines on above-average volume hurt the rating. Furthermore, the current price of the stocks had to be at least $10 with an average daily volume of 200,000 shares or higher. Finally, all stocks were within 20% of a 52-week high as of the Wednesday, December 6 market close.

The list of high dividend stocks includes a wide variety of companies including oil and gas stocks, rail, and financial stocks. The list is dominated by energy firms, so I would not suggest simply buying all stocks on the list, but doing further analysis on ones that interest you.

Using ETF's To Buy High Dividend Stocks

If you as an investor are not comfortable researching and buying individual high dividend stocks, then there are other options to choose to ensure you get dividend exposure in your accounts. An investor can buy exchange traded funds that have a high dividend stocks focus. Here are some examples of these ETF's:

iShares Cdn Dividend Index Fund
iShares Dow Jones Select Dividend Index
PowerShares HighY ield Dividend Achievers

These three indexes provide good exposure to high dividend stocks and allow an investor to enjoy the benefits of a portfolio that includes dividend investments. As usual, ensure your still do some research on the ETF so you know exactly what you are buying.

Financial Stocks are Good High Dividend Stocks

If you look at the list of high dividend stocks available on the S&P's Dividend Aristocrat list, you will notice that a number of them are stocks in the financial and insurance sectors. The reason is simple - these stocks have typically been around for a long time, earn a lot of cash, and are constantly looking for opportunities to reward investors for their investment in the company.

Here is a quick list of these financial and insurance stocks that have increased their dividends year after year for at least 25 years:

BAC Bank of America Corp.
FHN First Horizon National
FITB Fifth Third Bancorp
MTB M&T Bank Corp.
SNV Synovus Financial
USB U.S. Bancorp
WL Wilmington Trust Corp.

Each one of these stocks might be good additions to a watch list for high dividend stocks investors.

Sin Stocks - High Dividend Stocks with a Conscience

There is a group of stocks out there that people often refer to as Sin Stocks - and a lot of these Sin Stocks are high dividend stocks. There can be a place for these stocks in a dividend portfolio, however an investor must be aware of what they are investing in and comfortable with the direction of the company.

A couple of sin stocks examples include Altria Group or Las Vegas Sands. To invest in these, and investor must be comfortable with investing in Cigarette stocks or gambling. Some folks are morally opposed to this and thus these stocks would not make good investments. However, Altria sports a dividend yield of over 4% so it can have a pretty good impact on a dividend paying portfolio. Something to consider.

I am not writing this post to debate if it is right or wrong to invest in these stocks - each person needs to make this decision for themselves. However, these sin stocks can include some high dividend stocks that should be at least considered.