I’ve put together a report on the highest dividend paying stocks. As we all know, dividend paying stocks can really add punch to any portfolio’s return and I have always maintained that high-yielders can be a boon to any investor. However there are a few things to take note off.

Just having a high yield is not necessary a desirable thing in and of itself. There are a couple of rules that govern my selection of high yielding stocks when the dividend is extremely high — as in more than 4%. First what percentage of cash does the company have to pay out to the shareholders? You will want to find out this information because it alerts you as to whether a high dividend paying stock will be able to maintain its payout into the future. If the company is paying out more than it can afford, it is a sure sign that the dividend will soon be slashed, which, as income investors, is not what we want.

The other thing to consider when looking at yield is if the company belongs to sub-group of stocks whose dividends are taxed at a higher rate. For instance, real estate investment trusts have in the past offered fantastic dividends (and the potential for share price appreciation that made them a sweet deal in the early 2000s) however as a REIT their dividends are taxes as income. Therefore while most dividend taxes are capped, a REIT’s dividend will be taxed at the rate of your income. Which makes the typical 6-7% dividend return much less appetizing.

Now, the thing that you can do if you want to take in some of this REIT dividend goodness is buy them in your Roth IRA where the tax mess isn’t something you are going to have to worry about.
Anyway, we might be getting a little off subject. Back to high dividend yielding stocks…

The advantage of a high dividend paying stock is two-fold. On the one hand you get a company that is going to pay you +3% a year for holding their issue. This, in and of itself, is desirable. But, the other thing you hope to achieve is to invest in a more stable company. Dividend payers are notoriously less wanton with their cash since they have to pay a big chunk out of earnings every quarter, year, etc to cut those dividend checks. And after the last year or two that we have been through investing in a more conservative company is to a lot of folks liking.

The other advantage of high dividend payers is that you get the return right away. If you own a share of GE you know that you are going to receive 2.4% this year. With that money you can do whatever you choose, but you know you are going to get it. You don’t have to wait until you sell to see a return, you’re going to pocket a percentage every time the dividend is paid out. Obviously, when you combine this with capital appreciation you can potentially enjoy a very nice deal. Plus, the great part of it is that with most online brokers you can automatically instruct your dividend payments to go towards the purchase of more shares which allows you to build up your stake in the company, therefore earning more dividends, allowing you to purchase more shares which pay you more dividends and so on and so on.

So considering all of that, you probably want to know what are the highest paying dividend stocks today? Well as I said, you are probably going to want to find more than just the dividend yield. Because if the company is paying out 90% of its cash to the dividend then it’s probably not going to last. But, still searching for high dividend companies can provide a good jumping off point.

Therefore, what I have done is run a screen at Yahoo Finance, which is actually a pretty good finance portal if you are currently paying for the same data, and I’ve pasted the URL here.

It is possible that this link won’t last, so let me just tell you what I did to find the highest yielding companies. I went to Yahoo Stock Screener and set the screen for any company with a market cap over $500M that was trading over $10/share and that was yielding over 5% and that gives me the list of every company that fits that criteria. When I ran the screen there were companies yielding over 23% though I didn’t go looking at the details. Just FYI: Usually a yield that sounds too good to be true, is to good to be true.

So, there are the basics on how to find high dividend stocks, plus a list of the highest dividend paying stocks. If you have any questions just leave a comment below.

Cheers,
Bryan