It's great to pocket a dividend - especially when it's big. And buying solid utilities is, over the long haul, a very effective means of securing better than average yields - and if the wind is at your back, some capital gains as well.

IN PICTURES: How To Make Your First $1 Million

But there are also companies that pay outstanding yields and have an equally impressive record of capital appreciation. Here are three of the best such companies on the market today, each from a different sector, each relying on a completely different market segment for its ongoing cash flow needs.

Rental Cash
Realty Income Corp (NYSE:O) is a $3.77 billion REIT operation with 2,339 retail properties and an occupancy rate of 96.8% (as of Dec 2009). The company's shares pay a healthy 5% dividend and trade with a price/earnings ratio of 37. Since the beginning of 2010, Realty Income shares have climbed almost 33%, and for the trailing year, they're up nearly 46%. That's a better return than the SPDR DJ Wilshire REIT ETF (NYSE:RWR), which climbed only 19.7% and 33% for the same respective periods.

A Kinder, Gentler Cash Delivery System
Kinder Morgan Energy Partners LP (NYSE:KMP) is a Master Limited Partnership (MLP) operating a network of 28,000 miles worth of pipelines across the U.S. The company trades with a P/E of 46 and offers an annual yield of 6.27%. But best of all, the stock has moved considerably over the last year, climbing better than 27%. That's a vastly better return than the broader MLP group of stocks, as represented by the Alerian MLP ETF (NYSE:AMLP), which eked out barely 4% over the last twelve months.

KMP management just increased the annual payout on the shares by 4%, from $4.20 to $4.36. That's the 37th increase in the distribution since current management took the reins back in 1997.

Prince Philip
Altria Group, Inc. (NYSE:MO) pays a nice 6.1% dividend and trades at a multiple of 14.8x last year's earnings. Altria is in the business of selling cigarettes and other tobacco products. The company also owns a large stake in SABMiller plc (PINK:SBMRY), makers of, among other things, Miller Beer and Grolsch Beer.

Due to a rash of counterfeit sales of its Marlboro brand of cigarettes in the New York City area, Altria recently went on a litigation spree, singling out eight retailers for lawsuits in federal court. In the past year, the company's stock has rocketed higher by nearly 40%.

The Bottom Line
Big dividends and big capital gains: it's an investors dream. And the above three issues represent the cream of the crop when it comes to getting the best of both worlds. (For related reading, take a look at How Dividends Work For Investors.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!



Filed Under:
Tickers in this Article: MO, O, RWR, KMP, AMLP, SBMRY

comments powered by Disqus

Trading Center