Fast Money's Favorite Dividend Yielders 2012

With the 10-year Treasury yielding well under 2 percent, you’ve probably heard a lot about dividend-yielding stocks. But dividend yield is a tricky metric. It’s calculated by dividing annual dividends per share by price per share. Therefore, a high-yielding stock isn’t necessarily attractive in and of itself.

Here’s why. Yield increases when either dividends increase, (a higher numerator) or when share price decreases (a lower denominator). That second scenario isn’t terribly attractive.

That means when using dividend yield to make an investment decision, you can’t just take a higher yield at face value. You must also examine the fundamentals of a company to determine why the stock is yielding what it’s yielding.

Confused? No need. Fast Money has done the legwork for you. Following is a list of favorite dividend yielders from our pros. These are companies the Fast Money gang says offer a strong return and have strong fundamentals, too.

By Lee Brodie
Posted 9 July 2012

Trader: Steve Grasso, director of Institutional Sales Trading at Stuart Frankel

With a yield of nearly 5 percent, this is a stock that allows trader Steve Grasso says to sleep at night. Altria is perhaps best known as the maker of Marlboro cigarettes, the number 1 brand of cigarette in the U.S. According to the company, Marlboro's retail share is 42 percent, larger than the next 13 cigarette brands combined. It is also larger than the two largest competitors, R.J. Reynolds and Lorillard, combined. “Even in a bad tape, this stock tends to motor along,” says Grasso.

Trader: Pete Najarian, co-founder, OptionMonster.com

Trader Pete Najarian calls Intel his "money market account," meaning he considers it an extremely safe investment, although make no mistake, it’s a stock and subject to gains and losses. Although it was once considered dead money, Najarian thinks the stock is poised to perform with the introduction of "Ivy Bridge," the first chip to be made with a 3-D structure. Analysts have called it one of the most significant developments in silicon transistor design since the integrated circuit was invented in the 1950s. “And you get yield along the way,” says Najarian, “it pays slightly more than 3 percent.”

Trader: Tim Seymour, founder of EmergingMoney.com

Always looking for opportunities in the emerging markets, trader Tim Seymour recommends holding EM debt via the EMB. Made up of debt issued not only by the BRIC nations but also the Philippines, Peru and more, Seymour calls this ETF one of his favorite plays. “It’s a massive asset class that’s well supported,” he explains. “The broader market is coming to appreciate the sovereign debt of these nations. And it’s yielding 4.7 percent.” (Click here to see the top 10 holdings of the EMB)

Trader: Karen Finerman, president of Metropolitan Capital

As a shipper of bulk cargo, the fortunes of Navios are largely tethered to the economy. However, trader Karen Finerman says, “90-plus percent of their capacity is spoken for in 2012, and next year it’s 80 plus.” In other words, business is good for the foreseeable future. Founded in 1954 as a wholly owned subsidiary of US Steel to transport iron ore from Venezuela and Canada to the United States, the company has evolved into a diversified shipper with as many as 80 vessels operating at a time. According to its website, the company is often called upon to move bulk cargo in some of the world’s most challenging areas of navigation. The stock's yield is currently near 7 percent.

Trader: Guy Adami, managing director of stockMONSTER.com

Eaton is a global technology leader in electrical components, systems and services. The company has approximately 72,000 employees and sells products to customers in more than 150 countries. Trader Guy Adami likes the stock due to valuations he calls fair and its dividend yield of nearly 4 percent. Although the stock has declined recently, Adami believes shares are being unfairly punished due to Eaton’sacquisition of Cooper Industries for $11.8 billion. “This is a stock that’s very interesting,” he says.

Trader: Joe Terranova, chief market strategist for Virtus

If you need to have money in the stock market, traderJoe Terranova says “there’s no place like utilities." If the financial woes of Europe get so bad they seriously dent demand for power here in the U.S., then no stock is safe. However, short of that, for companies such as ConEd, Dominion Resources, Duke and rivals, it should remain business as usual. But rather than pick stocks, Terranova suggests playing the thesis with the XLU, the ETF that tracks the sector. “It has a dividend yield close to 4 percent,

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Trader: Brian Kelly, founder of Shelter Harbor Capital

In the quest for yield, trader Brian Kelly says reach out and touch someone! Well not literally. But he does see AT&T as an attractive stock that’s somewhat resistant to an economic downturn. “Even in a bad economy people continue to use their phones and smartphones,” he says. “And it has a 5 percent div yield.” Founded in 1876, by Alexander Graham Bell, AT&T is the nation’s number two cellphone carrier with revenue from wireless jumping 19.9 percent to $6.1 billion from the year-ago quarter. The company says 60 percent of its data customers were paying for its tiered data plans and of those, 70 percent were opting for the more expensive plans.

Trader: Simon Baker, CEO at Baker Avenue Asset Management

When talking about yield, it’s not unusual to talk about pharma stocks. Investors often rotate into this sector on the belief that even in a recession, drugs are something that people just can’t do without. But Abbott Labs is about more than just drugs. Although it’s perhaps best known for its arthritis medicine Humira, Abbott Labs also makes foods such as Similac infant products, blood glucose monitoring systems for diabetics, a slew of animal-care products and more. “It’s a defensive name, with a stable of good products and a yield of 3.2 percent,” Baker says.

Trader: Patty Edwards, principal, Trutina Financial

Chances are you have this company’s signature product sitting in your garage right now, but trader Patty Edwards thinks its stock also belongs in your portfolio. “From quieting a squeaky door to getting bugs off a windshield, people rely on WD-40 and buy it without looking at price,” she says. And Edwards also likes the technicals. “Looking at a year-to-date chart, the stock has been marching higher and with a dividend yield around 2.3 percent, the company generates greater return than the 10-year (Treasury)," she says. In case you’re curious, WD-40 literally stands for Water Displacement, 40th attempt. That's the name straight out of the lab book used by the chemist who developed WD-40 back in 1953.

Trader: Josh Brown, author of The Reformed Broker blog

“Boring is the new sexy,” says Brown, “and few stocks are more boring than this.” Once an integrated oil company, ConocoPhillips recently completed a spin-off of its downstream refining arm into another publicly traded company called Phillips 66. (ConocoPhillips retains no ownership interest.) That leaves the remaining company to do ‘boring’ work; that is, focus only on upstream activities only, which are generating higher rates of return. “Also their assets are largely in North America so you’re not subject to the volatility of the Mideast,” says Brown. “And it pays adividend yield of 4.7 percent," he adds. “You can’t beat it.”

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