3 High Dividend Stocks Bucking The Spring Pullback

The S&P 500 has pulled back approx. 4% since its early April highs, which begs the question, are there any dividend paying stocks that have beaten the market since then?  We took 3 dividend stocks from our High Dividend Stocks By Sector tables, and researched how they’ve done in all of the various rallies and pullbacks since last summer.

These 3 stocks have all held up better than the market in pullbacks, and have also participated in rallies. Not surprisingly, these defensive dividend stocks hail from the Healthcare and Utilities sectors: NextEra Energy, (NEE), Xcel Energy, (XEL), and Eli Lilly Co., (LLY):

In addition to their defensive characteristics, these stocks have been some of the best stocks to buy for price gains since Dec. 2010, and all 3 have beaten the market since the beginning of last summer’s market meltdown, which began right after July 7th, 2011. Even with its strong showing since last fall, the S&P is still flat since its highs last July:

Dividends: NEE raised its quarterly dividends to $.60/share, from $.55 in 2012, and XEL raised its dividend to $.26, from $.25 in 2011. LLY hasn’t raised its dividend since 2008, when they raised to $.49, from $.47, right in the midst of the market turmoil.

Covered Calls: If you want to improve upon its dividend yield, LLY’s near-the-money covered call options currently pay over 4 times its quarterly dividend in the October trade listed below.


Cash Secured Puts: Another lucrative options trading strategy is to sell cash secured put options below a stock’s price, so that you can achieve a lower potential entry cost. The other benefit of this strategy is that, as with selling call options, you’ll get paid your put premium $ within 3 days of making the trade, often even the same day.
 
The differences between the 2 strategies are: Put sellers don’t collect dividends, and they also don’t buy the underlying stock in order to place the trade. Instead, they may have the stock sold/assigned to them at expiration, if the stock’s price is below their strike price around that time. Similar to the covered call trade, this put option pays over 5 times what the dividends pay for this 5-month term.


Earnings Growth & Valuations: Although Utilities aren’t known for growth, NextEra did put up good numbers in its most recent quarter, and is projected to grow over 9% in its next fiscal year. NEE is trading much closer to the low range of its 5 year P/E range. Lilly, along with many of is peers, had a mediocre quarter, thanks to ongoing drug patent expirations, but it’s projected to bounce back next year, and actually has an undervalued PEG of .85:

Financials: All 3 of these defensive dividend stocks have financial metrics that are superior to their peers:

Disclosure: Author had no positions in any of the above stocks at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.