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Investors Business Daily
Investors Business Daily

Nine 'Safer Than AT&T' Stocks Pay The Plumpest, Lead-Free Dividends

AT&T's plump dividend used to be like money in the bank. But now investors seeking income and safety might look elsewhere as Ma Bell sinks like a ton of lead.

Truist Financial, energy firm EOG Resources and Simon Property Group are among nine S&P 500 stocks with credit ratings of A- or better that also yield 5% or higher, says an Investor's Business Daily analysis of S&P Global Market Intelligence and MarketSmith.

True, that's below the 7.7% yield of AT&T. But all these S&P 500 stocks possess something AT&T does not. They're backed by companies with A- or better credit ratings from Standard & Poor's. That's at least two rungs higher than AT&T's BBB credit rating. And they're not facing allegations of laying miles of lead-sheathed cables for phone networks before the 1960s, requiring a costly cleanup.

Choose One: Safety Or Dividends

Finding S&P 500 companies with the highest yields usually brings a degree of risk. Not a single prime or high-grade rated S&P 500 company (rated from AAA to AA-) yields more than 5%. And all 10 of the top yielding S&P 500 companies sport ratings of BB- or lower.

If you're looking to own a AAA rated company like Microsoft or Johnson & Johnson, don't expect a top yield to go with it. Microsoft yields less than 1% and Johnson & Johnson less than 3%.

But you can still find better than S&P 500 yields from companies with higher credit ratings than AT&T without the looming lead-sheathing cleanup costs. Keep in mind, though, even some of these S&P 500 companies face their own liabilities.

Safer Than AT&T Big Dividends

Leading the pack of A- or higher rated companies with high yields is Truist. The bank holding company operating mostly in the South and mid-Atlantic yields a respectable 6.3%.

And it does this despite sporting a decent credit rating of A-. Make no mistake: The company is not growing. Analysts think adjusted profit per share at the bank will fall more than 17% this year and another nearly 2% in 2024. And that's why the stock is down 22.3% this year. But the side-effect of the falling stock price is the improved dividend yield.

Shares of Houston-based energy explorer, EOG Resources, are also down this year by 8.4%. And that partially explains why it's yielding 6.1%. And EOG's profits are seen sagging nearly 20% this year. But it's important to note that the company still carries a credit rating of A-, well above AT&T's.

Not all shares of A- rated and higher companies with decent dividends, though, are down. A good example is Simon Property Group, a property owner based in Indianapolis. Shares are up 3.5% this year as adjusted income per share is seen rising 12.5% this year. But on top of all that is a dividend yield of 6.1%.

That's not to say that a credit rating of A- or higher will protect you from all risk. It won't. Even Johnson & Johnson and 3M face important product liabilities. But they at least have higher ratings than AT&T and don't need to dig up decades worth of lead-lined cables.

And that counts for something.

Highest Yielding S&P 500 Stocks With A- Or Better Credit Ratings

Company Ticker YTD Yield Credit rating
Truist Financial -22.3% 6.3% A-
EOG Resources -8.4% 6.1 A-
Simon Property Group 3.5% 6.1 A-
3M -15.2% 5.8 A-
Prudential Financial -7.0% 5.4 A
U.S. Bancorp -19.1% 5.4 A
Philip Morris International -2.2% 5.1 A-
ConocoPhillips -9.8% 5.0 A-
Realty Income -3.4% 5.0 A-
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
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