Top Four Stocks for Income During Period of Low Interest Rates, Bond Yields

An interesting conversation on investments surfaced recently at a dinner party with some friends. The topic was whether it was better to buy large-cap dividend-paying stocks, such as General Electric Company GE and The Procter & Gamble Company PG, or look at smaller dividend-paying companies.

Of course, I spontaneously said it depended on a host of factors, including the risk appetite of the investor and the economy.

When the economy is growing, and especially as it emerges from a recession like we saw it 2008, it would be advantageous to stock up with smaller dividend-paying companies. The reason is because small companies tend to fare better when adjusting out of a slow period than larger companies, which take much more time to strategize and put a plan into effect.

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Another way of looking at it is that it’s easier to steer a smaller boat versus a larger ship in calm waters, but when it gets rough out there, I would rather stay on a bigger ship. The same analogy applies to the question of small-cap versus big-cap stocks.

Now, as far as dividends are concerned, the most important thing is the underlying strength of the company and its previous and forward ability to pay dividends. You want to buy dividend-paying companies that have a valid and sustainable business—no fad stocks here.

Another major monetary benefit of small dividend-paying stocks is the much superior upside price appreciation potential that’s often associated with small-cap stocks. So while companies like General Electric and Procter & Gamble will consistently do well over decades, in the short run, adding some small dividend-paying stocks can help to boost your overall returns.

Below I have presented four dividend-paying stocks that have—and continue to provide—above-average price appreciation potential for the next year or so until interest rates and bond yields begin to rise, at which point you will need to take a step back and re-evaluate your portfolio.

I’m not sure if you have ever tuned in to World Wrestling Entertainment, Inc. (NYSE/WWE). It’s the testosterone-filled equivalent to a soap opera…in my opinion. Anyway, the company has been around for decades and used to be the go-to event for a guys night out prior to the growing popularity of mixed martial arts (MMA) fighting. Despite the added competition, the WWE continues to do fairly well. The stock is a consistent and big dividend payer with a dividend yield of 2.5%. The stock has advanced an astounding 136.97% over the past 52 weeks, blowing away the 23.19% advance by the S&P 500.

Chart courtesy of www.StockCharts.com

If you have pets, you are probably familiar with PetMed Express, Inc. PETS, the largest pet pharmacy in the United States selling prescription and non-prescription pet medications, along with other health products. PetMed pays out a quarterly dividend to $0.17 for a dividend yield of 4.1%. In addition, the stock price has moved up 28% over the past 52 weeks, beating the S&P 500.

Chart courtesy of www.StockCharts.com

For a more conservative play, take a look at Knoll, Inc. KNL, a seller of workplace and residential furnishings. While the stock’s business may not be that interesting, the stock pays out a dividend equating to a yield of 2.8%. Knoll has underperformed the S&P 500, gaining 3.66% over the last 52 weeks. But trading at 15.38 times its 2014 earnings per share (EPS) and with a price-to-earnings growth (PEG) ratio of 0.61, the stock has value.

Chart courtesy of www.StockCharts.com

Finally, on the healthcare end, Meridian Bioscience, Inc. (NASDAQ/VIVO) researches, manufactures, and sells diagnostic test kits, purified reagents, and other products. The kits are used for such medical conditions as gastrointestinal, viral, and respiratory infections. Sales are to hospitals, laboratories, research centers, diagnostics manufacturers, and biotech companies in more than 60 countries. The company pays out a 2.9% dividend yield, but the stock slightly underperformed the S&P 500 after advancing 21.66% over the past 52 weeks.

Chart courtesy of www.StockCharts.com

This article Top Four Stocks for Income During Period of Low Interest Rates, Bond Yields was originally published at Daily Gains Letter