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10 Large Caps with Highest Dividend Yields

Stock markets slid this week, with the Dow losing 1 percent. Treasurys rallied, demonstrating the attractiveness of income investments. Here are the 10 highest-yielding S&P 500 Index components, which offer big dividends and a margin of safety because of their size. They are ordered by dividend yield, from great to greatest.

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10. Progress Energy is an electric utility operating in North Carolina, South Carolina and Florida. Since 2007, it has grown revenue 1.9% annually, on average. Its dividend grew by a cent over that span. The company is scheduled to report second-quarter earnings Aug. 6. First-quarter net income increased 4.4%, to $190 million, or 67 cents a share, as revenue ascended 3.8%. Progress pays a 62-cent quarterly dividend, translating to a yield of 6.1%. Of analysts covering the stock, 17% rank it "buy" and 83% rate it "hold." None rank it "sell."

9. Pitney Bowes sells mail-processing equipment. It will release second-quarter numbers Aug. 2. First-quarter profit fell 24%, to $79 million, or 40 cents a share, as revenue declined 2.2%. The operating margin remained steady at 17%. Pitney Bowes trades at a price-to-projected-earnings ratio of 9.3, a 51% discount to its peer average. Its 0.8 PEG ratio — a measure of value relative to predicted long-run growth — signals a 20% discount to fair value. Half of the analysts covering Pitney advise buying its shares, which yield 6.2%.

8. Reynolds American makes cigarettes, including the Camel brand. During the past three years, Reynolds has grown earnings per share 2.2% annually, on average. The company will announce its second-quarter performance July 21. First-quarter profit multiplied to $82 million, or $1.02 a share, from $8 million, or 3 cents a share, a year earlier. Revenue advanced 3.4%. Reynolds sells for a PEG ratio of 0.3, a 70% discount to fair value. Of researchers following Reynolds, 38% advise buying its shares, which yield 6.5%, with a payout ratio of 83%.

7. Pepco Holdings is an electric utility in Washington, D.C., and Maryland. Since 2007, it has boosted net sales 1.9% a year, on average. First-quarter profit decreased 20%, to $36 million, or 16 cents a share, as revenue declined 6.4%. The operating margin extended to 6.4% from 5.6%. Pepco trades at a price-to-book ratio of 0.9 and a price-to-sales ratio of 0.4, reflecting discounts of 40% and 69% to industry averages. It's expensive based on projected earnings and cash flow. Roughly 40% of analysts covering Pepco rate its stock "buy."

6. Altria Group sells cigarettes, other tobacco products and wine in the US. Its stock has plummeted 33% a year since 2007, underperforming US. indices. Altria is due to release second-quarter numbers July 20. First-quarter profit increased 38%, to $813 million, or 39 cents a share, as revenue inched up 3.6%. Altria trades at a PEG ratio of 0.6, a 40% discount to fair value, and a forward earnings multiple of 11, a 16% discount to the tobacco industry average. Of analysts covering Altria, 60% rank its stock a "buy." A median target of $23.20 suggests 9% of upside.

5. AT&T is an integrated telecom company. During the past three years, AT&T has grown revenue 17% annually, on average. But its stock fell an average of 15% a year over that time frame. AT&T is scheduled to report second-quarter results July 22. First-quarter profit tumbled 21%, to $2.5 billion, or 42 cents a share, as revenue inched up 0.3%. The operating margin inched up to 20% from 19%. AT&T sells for a price-to-projected-earnings ratio of 10, a 27% discount to its peer average. The shares offer a lofty dividend yield of 6.7%, with a payout ratio of 83%.

4. Verizon is the largest domestic telecom company. Since 2007, it has boosted net sales 6.5% a year. Its stock dropped 14% a year over that time horizon. Verizon is due to announce its second-quarter performance July 23. First-quarter profit plummeted 75%, to $409 million, or 14 cents a share, as revenue inched up 1.2%. The operating margin declined to 18% from 19%. Verizon trades at a PEG ratio of 0.5, a 50% discount to fair value. Of analysts covering the stock, 38% rank it a "buy." It yields 7.1%, with an excessive payout ratio of 229%.

3. CenturyLink, formerly CenturyTel, is a telecom focused on rural areas and midsized cities. The company was created through the merger of CenturyTel and Embarq last year. In April, management announced a stock-for-stock merger with Qwest . The company is scheduled to report second-quarter results Aug. 4. First-quarter profit nearly quadrupled to $253 million, or 84 cents, as revenue tripled. CenturyLink sells for a PEG ratio of 0.4, a 60% discount to fair value. Its shares currently yield 8.4%, with a payout ratio of 103%.

2. Windstream, like CenturyLink, is a rural-focused telecom. Its stock has advanced 42% in the past 12 months, beating indices, but has dropped 8.1% a year since 2007. First-quarter profit decreased 16%, to $74 million, or 17 cents a share, as revenue gained 12%. The operating margin tightened to 32% from 33%. The stock trades at a forward earnings multiple of 13, on par with peers. It's expensive based on book value. Windstream pays a quarterly dividend of 25 cents, equaling an annual yield of 8.8%. It recently completed its acquisition of Iowa Telecom.

1. Frontier Communications is another rural-focused telecom. Its stock has fallen 6.6% this year. The company will report second-quarter results Aug. 4. First-quarter profit increased 17%, to $43 million, or 14 cents a share, as revenue declined 3.4%. The operating margin widened to 33% from 26%. Frontier trades at a premium to telecom peers based on projected earnings and book value. Frontier pays a 75-cent annual dividend, translating to a yield of over 10%. Its trailing payout ratio of 244% indicates that distributions aren't being funded by earnings alone.

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Disclosures:

Disclosure information was not available for Lynch or his company.

Disclaimer