These stocks offer alluring options for portfolio diversification. However, I do not recommend them for purchase just yet because I’d like to keep my eye on them for a little while longer.
Dominion Resources (NYSE:D)
This premier utility operates in the mid-Atlantic region and has very steady revenue and profit growth, thanks to better demand for power than in other regions. I might be inclined to grab Dominion, depending on how fourth-quarter earnings stack up. But I’d like to get at least a 4% yield, and that would require more pullback in this stock before I would consider opening my wallet. Dividend Yield: 3.9%.
Consolidated Edison (NYSE:ED)
A major provider of power to New York, New Jersey and Pennsylvania, Edison is the most conservative utility in the utility sector. It’s almost a proxy for a corporate bond when traders discuss it. Its chart shows a very constructive stair-step pattern, with the shares trading in a sideways formation during the past several months. The stock is in a nice uptrend. I’m holding out for some higher yielding picks, though, if we get more good news about the economy. But if the economy starts to fade again, ED will be my go-to pick. Dividend Yield: 4.1%.
General Mills (NYSE:GIS)
This best-of-breed food company missed earnings estimates by $0.03 the last quarter, tempering its uptrend. The company’s sound reputation, however, helped keep the stock from giving much back. Still, I’m on the hunt for higher dividend yields if the economy begins to pick up speed. On the other hand, GIS will stay on my list if the economy stalls on the heels of a European recession. Dividend Yield: 2.9%.
Bristol-Myers Squibb (NYSE:BMY)
I want to see shares of BMY come down about 10% from their current level before the stock can be a potential addition to my “buy” list. With a rotation out of some defensive sectors under way, I think I’ll get that shot. If that happens, I’d be highly inclined to add BMY to my conservative high-yield portfolio with a 5% dividend yield. Until then, I’ll wait. Dividend Yield: 4.1%.
Duff & Phelps Utility & Corporate Bond Trust (NYSE:DUC)
I didn’t expect the bond market to rally alongside the stock market this month, but that’s been the story so far, and DUC rallied to a 52-week high. Again, I would expect yields to rise a tad with a stronger economy, but there seems to be a consistently strong appetite for this kind of high-quality yield that, for now, is trading at a premium I don’t want to pay. Dividend Yield: 6.8%.
Flaherty & Crumrine Preferred Income Fund (NYSE:PFD)
Preferred stocks trade much like bonds in that they’re construed to be fixed-income assets, just junior to corporate bonds and convertible debt when a company is servicing debt payments. PFD is still trading at a very steep 25.79% premium to net asset value (NAV), making this fund fall outside my risk profile for an asset that doesn’t yield at least 10%. Dividend Yield: 7.55%.
Two Harbors Investment (NYSE:TWO)
There’s talk about new government intervention to ease the burden of refinancing home loans. That would carry the possible risk of massive pre-payment of higher-interest-rate loans, thereby pinching the already-tight spread with which these mortgage REITs are grappling. TWO issued another secondary offering at the $9.25 level that will keep the shares in check for a while. No hurry to jump in here. Dividend Yield: 16.6%.
