6 Noteworthy Stocks with Yields Over 4%

If you’re looking to boost the total dividend yield of your portfolio, picking up a few stocks yielding 4%, 5%, or 6% can go a long way. One must be careful, of course, to select companies that have sustainable dividend payouts and that are good long-term investments. Although not every one of these may make for a good investment, and readers should do their own more thorough research, here are six high-yielding companies that are worth being aware of.

Altria Group (MO)

Altria is one of the largest tobacco companies in the world, and also has an interest in alcoholic beverages. Depending on the individual investors views on ethical investing, it may or may not meet your requirements for inclusion in your portfolio, but the dividend yield is particularly high. There have been threats to the tobacco industry in many countries including the US for quite a while, and the uncertainty has kept stock valuations quite low. Coupled with the high dividend yields, tobacco investors that have reinvested their dividends have absolutely crushed the market over the last few decades. With a market capitalization of over $50 billion, Altria is the market leader in the United States. A key downside to this stock is Altria’s balance sheet. With a fairly high debt/equity ratio, a moderately low (but very stable) interest coverage ratio, and goodwill that approximately equals shareholder equity, Altria’s balance sheet leaves a lot to be desired. This is partially offset by the consistency of sales and profits, but worth taking into consideration when investing.
Dividend Yield: 6.30%
Latest Annual Dividend Increase: 10%
Payout Ratio: 80%
Total Debt/Equity Ratio: 2.37

CenturyLink (CTL)

CenturyLink, created after the acquisition of EMBARQ by CenturyTel, is an integrated communications company with significant operations in the heartland of the United States. The dividend yield has decreased a bit in recent months due to a significant stock rally, but the yield is still quite significant. The high payout ratio makes the dividend a little bit risky, and limits dividend growth. This is typical in this industry, however, and the consistent operations help keep the dividend stable. CenturyLink, like the previously mentioned stock, has a balance sheet that is stable but not particularly appealing.
Dividend Yield: 6.50%
Latest Annual Dividend Increase: 4%
Payout Ratio: 91%
Total Debt/Equity Ratio: 0.79

Allete (ALE)

Allete operates in both the energy and real estate industries. The company has significant leverage, but this is to be expected from a utility, and the stock trades at a lower P/B ratio than many other utilities. The utility portion of this company operates mainly in the US Midwest, and they have significant and growing renewable energy sources in the form of wind and hydro power. The company has a significant amount of real estate in Florida, and intends to sell at reasonable prices. A strike against ALE is that the company did not increase the dividend in 2010 over 2009.
Dividend Yield: 4.70%
Latest Annual Dividend Increase: 0%
Payout Ratio: 74%
Total Debt/Equity Ratio: 0.81

Leggett and Platt (LEG)

Leggett and Platt is a diversified designer and manufacturer of engineered components for a variety of industries. The balance sheet for the company is mediocre. The valuation and payout ratio are a bit high, but that is partly due to the cyclical nature of the company. As the economy recovers, continued rebound is expected by analysis forecasts. The good news for the company is that it generates extremely impressive cash flows, and in particular, a very healthy level of free cash flow in comparison to their net earnings. This allows the company to not only offer a significant dividend yield, but also to spend a considerable amount of money on share repurchases which fuel dividend growth.
Dividend Yield: 4.70%
Latest Annual Dividend Increase: 4%
Payout Ratio: 90%
Total Debt/Equity Ratio: 0.56

The Southern Company (SO)

The Southern Company is an electrical utility operating in Alabama, Florida, Georgia, and Mississippi. SO provides a recession-resistant and substantial dividend to potential investors. Downsides of the company include a weak balance sheet (but fair for a utility), and weak free cash flow. The dividend growth rate is significant considering the yield, and so the combined dividend yield and dividend growth rate is fairly attractive. I do find utilities, as a group, to be fairly expensive in the current market.
Dividend Yield: 4.80%
Latest Annual Dividend Increase: 4%
Payout Ratio: 73%
Total Debt/Equity Ratio: 1.07

Lockheed Martin (LMT)

Based on the recently increased dividend and the continually decreasing stock valuation, this large defense and aerospace company now offers a dividend yield in excess of 4%. Revenue, earnings, and cash flow have all performed strongly during the recession. Free cash flow is substantial, and enough to support the significant dividend payout. Unfortunately, like many companies on this list, Lockheed Martin has a balance sheet with a fairly large amount of debt, and goodwill that greatly exceeds shareholder equity. The interest coverage ratio, however, is higher than one might expect, and that’s a sign of stability. The low valuation, substantial dividend growth and yield (even with a low payout ratio), may make this stock reasonably attractive despite the shortcoming of the balance sheet.
Dividend Yield: 4.00%
Latest Annual Dividend Increase: 20%
Payout Ratio: 34%
Total Debt/Equity Ratio: 1.28

Full Disclosure: I am long CTL,PEG and SO.

Northrop Grumman Beats on Improved Performance

Los Angeles-based leading shipbuilder and defense contractor, Northrop Grumman Corporation (NOC), reported impressive fourth quarter 2010 results of $1.27 per share compared with $1.19 in the fourth quarter of 2009. Northrop results also exceeded the Zacks Consensus Estimate of $1.01 for the quarter. The upside in earnings was attributable to better performance across all its segments, barring Electronic Systems.

Fiscal 2010 earnings came in at $6.77 per share, easily beating the Zacks Consensus Estimate of $5.98 and fiscal 2009 earnings of $4.87 per share.

Operational Performance

Sales for the reported quarter decrease 3.6% to $8.6 billion, from $8.9 billion in the year-ago quarter, and was 1.9% lower than the Zacks Consensus Estimate of $8.8 billion. In the reported quarter, earnings from continuing operations increased marginally to $376 million from $375 million in the fourth quarter of 2009. Net earnings in the reported quarter decreased to $376 million compared with $413 million in the prior-year period.

Fiscal 2010 revenue was $34.8 billion versus the Zacks Consensus Estimate of $34.1 billion. Full year revenue also outdid the $33.8 billion generated a year ago.

Segmental Performance
Aerospace Systems

Aerospace Systems quarterly sales declined 4% year over year to $2.7 billion, principally due to lower volume for civil space and missile defense programs; along with fewer working days. Aerospace Systems’ operating income increased 11% to $322 million. Operating margin increased to 12.1% from 10.5% in the year-ago quarter. Higher operating income and margin rate were driven by improved program performances and lower costs.

Electronic Systems 

Electronic Systems sales declined 10% to $1.9 billion, due to fewer working days and lower volume for several programs nearing completion and contracts transitioning to their next phase. This was partially offset by higher volume for targeting systems programs. Electronic Systems’ operating income decreased 0.7% to $272 million. However, operating margin increased to 14.5% from 13.2% year over year. Higher margin rate reflects improved program performance for intelligence, surveillance and reconnaissance programs, including postal automation and improved performance for land and self-protection systems programs.

Information Systems 

Information Systems sales of $2.1 billion were 4.1% lower than the year-ago period, principally due to fewer working days and lower volume for intelligence and defense programs. This was partially offset by higher volume for civil systems programs. Information Systems operating income increased 66.4% to $178 million. Operating margin increased to 8.5% from 4.9% year over year. Higher operating income and margin primarily reflect improved program performance for civil systems programs.

Shipbuilding 

Shipbuilding sales increased 4% to $1.7 billion, driven by higher volume for submarine and expeditionary warfare programs. Operating income also rose 52.3% to $134 million. Similarly, operating margin rose to 7.7% from 5.3% in the year-ago quarter. The rise in operating income and rate reflect higher volume and improved program performance for expeditionary warfare, aircraft carrier and submarine programs.

Technical Services 

Technical Services’ sales increased 6% to $795 million due to higher volume for integrated logistics and modernization programs. Technical Services operating income increased 22.5% to $49 million. Operating margin increased to 6.2% from 5.3% year over year. The improvements in operating income and margin were attributable to higher volume, improved business mix and improved performance.

Financial Condition 

Northrop Grumman ended 2010 with cash and cash equivalents of approximately $3.7 billion compared with $3.3 billion at year-end 2009. Cash generated from operations in 2010 totaled $2.5 billion versus cash from operations of $2.1 billion in the year-ago period. Long-term debt marginally decreased to roughly $4 billion at fiscal 2010 end from $4.2 billion at the end of fiscal 2009.

Outlook

Northrop Grumman’s total order backlog at the end of fiscal 2010 stood at $64.2 billion compared with $69.2 billion at fiscal-end 2009. The company affirmed its revenue guidance for fiscal 2011 to about $27.5 billion. It expects its earnings per share (EPS) to be in the range of $6.40 - $6.60.
Los Angeles-based Northrop Grumman Corporation is one of the world’s leading shipbuilders and the second largest defense contractor in the U.S. The company supplies a broad array of products and services to the U.S. Department of Defense (DoD), including electronic systems, information technology, submarines and surface ships, aircraft, space technology and systems integration services.

Disclosure I am long NOC shares.

Northrop Grumman (NOC) Declares $0.47 Quarterly Dividend

Northrop Grumman Corporation (NYSE: NOC) today declared a quarterly dividend of $0.47 per common share, $1.88 annualized.

The dividend is payable March 12, 2011, to shareholders of record as of the close of business Feb. 28, 2011. The ex-dividend date is February 24, 2011.

Yield on the dividend is 2.8%.

Disclosure I am long NOC shares

Cobham, Northrop Grumman Get 2.4 Billion U.S. Army Deal

Cobham and Northrop Grumman(NOC) have been selected to provide the VIS-X Vehicular Intercommunication System Expanded for the U.S. Army, Cobham said Monday. The companies will be required to deliver up to 500 VIS-X systems per month during the first year following completion of first article testing and up to 2,000 systems per month in subsequent years. The total value of the 10-year contract has an anticipated not-to-exceed ceiling of $2.4 billion, of which Cobham's share is 50%.

Disclosure I am long NOC shares in my industrial goods folio.

Raytheon First-quarter Net Income Rose 15%

Raytheon Co.(RTN) said Thursday its first-quarter net income from continuing operations jumped to $460 million, or $1.11 a share, from $399 million, or 92 cents a share, in the year-ago period. Analysts polled by FactSet Research were looking for earnings of $1 a share in the recent quarter, on average. Sales rose 10% to $5.9 billion from $5.4 billion. The company ended the quarter with a backlog of $37.9 billion. Shares of Raytheon rose 2.4% in premarket trading to $42.30.

Disclosure I am long RTN shares.

Northrop Grumman 1st-qtr profit up nearly 50 pct

Northrop Grumman Corp. said Wednesday that first-quarter earnings were $389 million, or $1.17 a share, compared to $264 million, or 76 cents a share, in the year-ago period. Sales increased 8% to $8.3 billion. Earnings in the first quarter of 2008 were reduced by a pre-tax charge of $326 million, or 61 cents a share, in the company's shipbuilding sector.

Pension-adjusted earnings per share from continuing operations were $1.32 a share in the first quarter of 2009. Analysts polled by FactSet Research estimated, on average, earnings per share of $1.08 and sales of $8 billion. The Los Angeles-based defense contractor raised its 2009 earnings-per-share forecast for continuing operations to a range of $4.65-$4.90 from $4.50-$4.75.

Disclosure I do not own NOC shares.