Investing

4 High Dividend Yields Close to 5% That Are Often Overlooked

Lee Jackson

Published: July 18, 2016 8:15 am

Last Updated: January 13, 2020 5:37 am

At the turn of the century, most banks offered five-year certificates of deposit (CDs) that yielded a stunning 5% and were guaranteed up to $250,000. These days, five-year CDs yield a paltry 2% at the banks that pay the most. After taxes and inflation, that is basically a nonstarter for most people. The question remains, for those that have some risk tolerance, where do you look now for yields?

While stocks that pay good dividends are not comparable to the safety of bank-sponsored CDs, it is possible to find surprising stocks that pay very good dividends that, at least for now, look to be able to maintain those payouts to shareholders. We found four that may surprise.

General Motors

This company is in the automobile sector, and shares look to be very inexpensive at current levels. Despite all the recall troubles and litigation issues, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades just below an incredible 5.75 times estimated 2016 earnings. The company, like competitor Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago, and it grabbed a big chunk of what is now the world’s largest auto market.

With the company facing continued possible punitive damages over ignition switches, there will continue to be a headline risk cloud over the stock. Long-term patient investors that can look beyond current issues may stand to make outstanding money on the auto giant, especially as the oil price plummet and low gasoline prices continue to push new buyers into showrooms.

The company reported very solid first-quarter earnings back in April, and with gas prices still at the lowest levels in years, and GM producing some of the best new models in years, the future for the battered stock looks very good.

GM investors are paid an outstanding 4.95% dividend. The Thomson/First Call consensus price target for the stock is $36.69. Shares closed Friday at $30.77.

GameStop

This top retailer also looks to benefit from new releases. GameStop Corp. (NYSE: GME) operates as an omnichannel video game retailer. It sells new and pre-owned video game hardware; physical and digital video game software; pre-owned and value video game products; video game accessories, such as controllers, gaming headsets, memory cards and other add-ons for use with video game hardware and software; and digital products, including downloadable content, network points cards, prepaid digital and subscription cards and digitally downloadable software.

The company also sells mobile and consumer electronics, including smartphones, tablets, headphones and accessories, as well as pre-owned smartphones; personal computer (PC) entertainment software in various genres, including sports, action, strategy, adventure/role playing and simulation; and strategy guides, magazines and gaming-related toys. As of January 30, 2016, it operated approximately 7,117 stores in the United States, Australia, Canada and Europe. GameStop primarily offers its products under the GameStop, EB Games and Micromania names.
Leading Wall Street analysts feel that hardware updates and the holiday release slate this year should help the gaming segment. In addition, the second-half hardware refreshes and fourth-quarter high-quality product releases could help drive traffic to the stores.

GameStop investors receive a large 5.3% dividend. The Wall Street consensus price target is $35.82. Shares closed most recently at $27.99.

GlaxoSmithKline

This top global pharmaceutical could offer outstanding total return for investors as solid portfolio holding. GlaxoSmithKline PLC (NYSE: GSK) offers products in such therapeutic areas as respiratory, anti-virals, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, emesis, dermatology, rare diseases, immuno-inflammation, vaccines and HIV. It also provides consumer health care products in wellness, oral health, nutrition and skin health areas.

Last year the company announced that the dividend would stay at its current level through 2017, a solid pledge for those seeking security. In addition, the FDA approved the company’s Nucala add-on product for severe asthma with a very broad label. In addition, its ViiV Healthcare unit also reported promising data for its HIV treatments. GlaxoSmithKline plans to submit up to 20 new regulatory filings within the next five years, which confirms a very strong pipeline.

GlaxoSmithKline investors are paid an outstanding 5.15% dividend. The consensus price objective is set at $47, and the shares closed Friday at $43.92.

Guess

This stock recently bounced off a 52-week low and could be heading higher. Guess? Inc. (NYSE: GES) designs, markets, distributes and licenses one of the world’s leading lifestyle collections of contemporary apparel and accessories for men, women and children that reflect the American lifestyle and European fashion sensibilities. Its apparel is marketed under numerous trademarks, including Guess and Marciano.

The company’s lines include full collections of clothing, including jeans, pants, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. It also selectively grant licenses to manufacture and distribute a broad range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, kids’ and infants’ apparel, outerwear, swimwear, fragrance, jewelry and other fashion accessories.

Shareholders receive a huge 5.9% dividend. The consensus price target is set at $16.50. The stock ended last week at $15.29 per share.

Clearly these are stocks for more aggressive accounts, but the total return potential is outstanding, and all of them do very well in their respective sectors. Investors may want to buy partial positions in front of second quarter earnings.