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Wall Street has managed to maintain its 2013 momentum through the first six months of 2014.
Stocks advanced another 6% from January through June, pushing the S&P 500 close to 2,000 and the Dow Jones Industrial Average to the brink of 17,000. Such heights would have been unfathomable five years ago.
The continued rise in markets has lifted many boats, including dividend stocks.
The iShares Select Dividend (DVY) ETF, which tracks some of the top dividend stocks on U.S. exchanges, is up 7.5% year-to-date. Some of the most generous dividend payers have been among the best-performing stocks so far this year. That’s no real surprise. With the Fed keeping short-term interest rates near zero for at least another year, income investors continue to flock to dividend stocks in droves as an alternative source of yield.
In a crowded field of strong performers, here are the five top dividend stocks yielding at least 3% that have outpaced the competition through the first six months of 2014.
5 Top Dividend Stocks for the First Half of 2014
Pepco Holdings (NYSE: POM)
Yield: 3.9%
YTD Gains: 43%
Shares of this Washington, D.C.-based electric power company took off in April after the company was bought for $6.8 billion by nuclear-power giant Exelon (NYSE: EXC). The buyout sent Pepco shares soaring 17.5% in just one day after the deal was announced, and the stock has continued to rise. While Pepco hasn’t increased its payout since 2008, it has paid $1.08 per share annually for the past six years.
Entergy Corp. (NYSE: ETR)
Yield: 4.1%
YTD Gains: 28%
Entergy is another energy company that has risen steadily in 2014. Like Pepco, Entergy hasn’t increased its payout in a while (since 2010). But the company has been a reliable dividend payer for a decade, and its 4.1% yield is pretty appetizing. And it’s a growing company, with first-quarter earnings per share being a 150% improvement from the same quarter a year ago. That has helped propel Entergy shares to a four-year high.
Eli Lilly (NYSE: LLY)
Yield: 3.2%
YTD Gains: 23.6%
This pharmaceutical giant has been on a tear. And it’s not because of strong earnings.
The company won a patent battle on its lung-cancer drug, Altima, on March 31. The U.S. District court decision to preserve Eli Lilly’s $2.6 billion-a-year drug from generic competition was a major victory for the company. It was also a major victory in the court of public opinion, as the company’s shares have risen nearly 10% since the ruling.
Eli Lilly’s upward trajectory, plus its 3.2% yield, make it an enticing play for any income investor.
Reynolds American (NYSE: RAI)
Yield: 4.3%
YTD Gains: 21%
Some investors may have a moral stance against investing in the second-largest tobacco company in the U.S. But you can’t argue with the stock’s 2014 performance.
Reynolds is the maker of name cigarette brands such as Camel, Pall Mall and American Spirits. The 21% bump in Reynolds’ stock price likely has something to do with the company’s latest dividend hike. In March, Reynolds increased its quarterly payout from $0.63 to $0.67 a share – the fourth consecutive year the company has upped its dividend.
Another catalyst behind Reynolds’ spike this year has been its introduction of a new e-cigarette. Reynolds released its new Vuse Digital Vapor Cigarette earlier this month to appeal to a demographic of those who are trying to kick their smoking habits.
ConocoPhillips (NYSE: COP)
Yield: 3.2%
YTD Gains: 22%
As a consumer, you probably haven’t appreciated the recent rise in oil prices. But it’s been a boon for big-oil companies like ConocoPhillips.
The cost of a barrel of oil has risen from less than $93 in mid-February to near $107. During that time, ConocoPhillips shares have shot up 35%. It’s no mystery as to why.
Meanwhile, the company continues to be a steady dividend grower, having increased its payout 47% since the recession.
Bottom Line
Who knows what will happen with any of these stocks in the second half of the year? After all, past performance is no indication of . . . well, you know.
However, each offers a generous yield, and all of them have outperformed the market by a wide margin so far this year. If nothing else, they’re the types of dividend stocks that are striking a chord with investors in 2014.
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