In a world of disappearing income, these stellar dividend stocks offer returns and stability

Published Tue, Oct 12 20211:54 PM EDTUpdated Tue, Oct 12 20215:17 PM EDT

Stocks may have rallied all year, with the S & P 500 up over 16% for 2021, but it's getting more difficult to find reliable income in the market, especially if price returns start to slow. Stock prices are 27% higher than pre-pandemic highs, and 93% above post-pandemic lows, Credit Suisse found. However, the firm pointed out the dividend yield for the S & P 500 is down to 1.3% from its pre-pandemic level of 1.8%. That's well below a 10-year Treasury yielding 1.58%. This is because, while stock prices have been on a tear, dividends haven't kept pace with companies afraid to raise payouts given uncertainty around the pandemic. That's resulted in a low-income environment for dividend investors. However, there are still options out there for income investors. CNBC Pro compiled a list of stocks that offer relatively large dividend yields and stability. Financial institutions dominate the list. There's also one defense company, General Dynamics and a tool company Snap-On . CNBC Pro first screened data from S & P Capital IQ Pro for stocks with a dividend yield of more than 2% and then narrowed the list to those with dividend payout ratios in the lowest quartile of the S & P 500. The payout ratio shows how much of a company's earnings are paid out as dividends. To further strengthen the search for stable companies, CNBC Pro chose only stocks with the highest tier of credit ratings from Standard & Poor's. Each stock on this is list is also beating the market in terms of total return. JPMorgan Chase, State Street and Bank of New York Mellon are a few of the names that made the list, along with insurance giants MetLife, Aflac and Allstate. JPMorgan Chase is scheduled to report quarterly earnings before the bell Wednesday. Allstate has the lowest dividend payout ratio — about 12% — of the stocks on the list. Typically, a lower payout ratio indicates that a company is able to pay out dividends and still reinvest most of its earnings in into operations. A higher ratio could signal less stability, implying that the company spends much of its earnings on dividend payouts and has less to reinvest in keeping the business going or cover future dividends. The next lowest payout ratio on the list is about 21% and comes from Aflac . Allstate and Aflac have year-to-date returns of 18.6% and 24.8%, respectively. MetLife has the highest dividend yield — 2.95% — as well as the highest year-to-date return on the stock, 42%. Lower on the list is Snap-On , which manufactures tools and equipment for the auto industry. The company could also be positioned for strong earnings, as vehicle makers look to innovate and integrate technological upgrades over the next few years. General Dynamics , which makes business jets and combat vehicles, also made the list. It's looking for a rebound in demand for the former, as the economy continues to reopen. The company recently won nine-figure contracts with the U.S. Army and Navy.

People pass a sign for JPMorgan Chase at its headquarters in New York City.

Spencer Platt | Getty Images

Stocks may have rallied all year, with the S&P 500 up over 16% for 2021, but it's getting more difficult to find reliable income in the market, especially if price returns start to slow.