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Cramer’s Top 5 Dividend Plays

Cramer’s Top 5 Dividend Plays

“If I had to pick one attribute that I most like to see in a stock,” Cramer says in his new book, Getting Back to Even, “it’s a safe, sizable dividend.”Once considered stodgy and boring, dividend-paying stocks were used mostly to protect an investor’s portfolio. The regular cash payout helped to balance out losses from other holdings. But these companies took on new meaning after the 2008 crash, at least for Cramer.The declines we saw after the fall of Lehman Brothers gave rise to a group of sto
Posted 20 Nov 2009

“If I had to pick one attribute that I most like to see in a stock,” Cramer says in his new book, Getting Back to Even, “it’s a safe, sizable dividend.”

Once considered stodgy and boring, dividend-paying stocks were bought mainly for their dependable income stream. But these companies took on new meaning after the 2008 crash, at least for Cramer.

The declines we saw following Lehman Brothers’ collapse gave rise to a group of stocks that Cramer called the “accidental high yielders.” These were mostly cyclical companies that paid small dividends and, as a result, offered small yields. But when their share prices plummeted, the yields shot higher, even though the dividend itself never changed. That gave investors a “twofer”: The payout functioned as a cushion against further losses, and the economic sensitivity of the stocks meant they’d rebound when American business did. So, at least for time, investors got safety and growth, a rare combination indeed.

The traditional reason for owning dividend-paying stocks still holds, though. Cramer outlines the what, how and why of dividends in Getting Back to Even, so pick up the book if you want the complete primer. But to get you started, he pulled together a diversified list of five names that he calls his “Dividend Defensive Line.” Click through the slide show to find out who they are.

One last note: Remember that the numbers listed here were correct as of publish time. But they may have changed a bit since. So do the research to make sure these stocks still work for your portfolio before deciding to buy.

Eli Lilly (LLY)

Eli Lilly’s 5.5% dividend yield is one of the highest in big pharma, and this is the only company that’s still consistently raising its payout. For 41 consecutive years that dividend’s been increased, most recently in December 2008, which brought the annual total to $1.96 a share.

Eli Lilly’s 5.4% dividend yield is one of the highest in big pharma, Cramer says, and this is the only company in the group that’s still consistently raising its payout. The latest increase, in December 2008, marked 41 consecutive years of Lilly’s commitment to shareholders and brought the annual total to $1.96 a share.

Consolidated Edison (ED)

Con Ed, as it’s known, boosted its dividend in January 2009 for the 34th year in a row. Each quarter, shareholders receive 59 cents a share, or $2.36 annually. That amounts to a hefty 5.6% yield.

Con Ed, as it’s known, boosted its dividend in January 2009 for the 34th year in a row. Each quarter, shareholders receive 59 cents a share, or $2.36 annually. That amounts to a generous 5.6% yield from this publicly traded utility.

AT&T (T)

AT&T, along with Verizon Communications – which Cramer said also could have been on this list – is dominating the wireless space, no doubt thanks to Apple’s mega-star handset, the iPhone. As the business grows, shareholders collect 41 cents a share each quarter, or $1.64 a share annually, which translates to a 6.2% yield.

AT&T, along with Verizon Communications – which Cramer said also could have been on this list – is dominating the wireless space, no doubt thanks to Apple’s popular iPhone handset. Shareholders collect 41 cents a share each quarter, or $1.64 a share annually, which translates to a 6.2% yield.

PowerShares Financial Preferred Portfolio (PGF)

Granted, this is an exchange-traded fund, but it offers the same dividend benefits of any other company on this list. Cramer recommends the PGF because it offers exposure to the preferred shares – half bond-half stock securities, the holders of which are paid before common stock shareholders – of 30 financial companies, rather than just one, which would carry more risk.Cramer also likes the 10-cent to 12-cent monthly dividend, which yields 8.58%. He expects the banks to rebound as the economy mo

Granted, this is an exchange-traded fund, but it offers the same dividend benefits of any other company on Cramer’s Dividend Defensive Line. He recommends the PGF because it gives you exposure to the preferred shares – half bond-half stock securities, the holders of which are paid before common stock shareholders – of 30 financial companies, rather than just one, which would carry more risk.

Cramer also likes the 10-cent to 12-cent monthly dividend, which yields 8.58%. He expects the banks to rebound as the economy moves, and the PGF will capture that growth while also putting cash in your pocket.

Kinder Morgan Energy Partners (KMP)

Kinder Morgan is a master limited partnership, which means the company pays no corporate taxes and passes along most of its earnings to shareholders in the form of a distribution, something very similar to a dividend. Kinder Morgan operates 26,000 miles of oil and gas pipeline and makes its money not according to these commodities’ prices but through the volume it stores and transmits. That means wildly fluctuating energy prices won’t hurt the company. The yield can be a tad volatile, though, as

Kinder Morgan is a master limited partnership, which means the company pays no corporate taxes and passes along most of its earnings to shareholders in the form of a distribution, something very similar to a dividend.

Kinder Morgan operates 26,000 miles of oil and gas pipeline and makes its money not according to these commodities’ prices but through the volume it stores and transmits. That means wildly fluctuating energy prices won’t hurt the company. The yield can be a tad volatile, though, as KMP changes its distribution every quarter depending its earnings. But the payout’s been raised consistently every quarter or two since 1997. Right now shareholders get $1.05 a quarter, or a 7.4% yield.