In mid July, Ian Tam of Morningstar Research examined the top S&P 500 companies paying reasonable dividends with enough cash to pay them.

The criteria he used was:

S&P 500 stocks

Dividend yield

Quarterly and Annual Cash Flow Momentum ( past 4 quarters of operating cash flow compared with the same figure one quarter and 4 quarters ago)

5 year variability of earnings ( a measure which shows how steady a company’s earnings have been over the past 5 years – what a low number)

Payout ratio on earnings less than 80%

payout on operating cash flow less than 60%

companies show positive earnings in their latest reported quarter

dividend yield of greater than 1.33%

Company              Mkt Cap   Earnings  Div Yield  Ann CF  Qtrly CF   Payout on   Payout on

($ Bil)       Deviation  %            Mo           Mo              Earnings %  Oper CF

Wells Fargo           275.902     1.9            3.0          80.9          18.8              37.2                n/c

Altria Group          111.212    2.7             4.8           79.2           5.1              72.9               67.7

Southern Co            47.890     2.9            5.3            65.3           2.4               71.6              30.9

UPS                            93.501    2.4            3.4              18.9         94.7             54.4              52.0

Newell Brands         13.424    4.2           3.3              44.1         20.2              33.5             35.5

Regency Realty        10.450    6.4            3.6             47.7         18.8            146.1             57.0

Bank of America    292.317    10.1         2.1               75.2       24.7              22.0               9.5

PPL                              21.580    4.6           5.8                9.4       13.9               67.3             38.5

AT&T                         199.582    2.7           6.2                4.9          2.8              62.3              28.6

Prudential Fin           40.744    7.4           3.7               61.9         0.8             29.0              15.5

The other companies in the chart were Kimco Realty, Ameriprise Financial, Verizon Communications, Omicom Group and Johnson Controls

Linking to dividend paying stocks, one never knows when the market goes down but being defensive with dividend paying companies means you will loose less. In 2008, if you own these types of stocks the market went down 37%, these went down 19.9% and came back faster. The above are a mixture of banks, utilizes, and consumer services. If you do not own one, the price will move up and down – put them on your list to buy at a good price and remember dividends count as total return.

There are more questions than answers, till the next time – to raising questions.