With the markets rip-roaring higher this month, it is time to "make hay while the sun shines" in our dividend-capture strategy. While I try to remain disciplined in the sectors and in types of names I play, I do exercise some flexibility when market conditions are ripe.
At the moment, the utilities are offering some solid yields, and the bullish tailwind means they may not trade as "efficiently" as usual. (I describe as "efficient" the trading patterns of certain groups in which investors are interested in the dividend. For those groups, the stocks usually drop ex-dividend and then take some time to return to the pre-dividend price, thus wrecking your capital utilization.)
It often takes a long time to work out of utility names. However, right now there are so many juicy ones about to pay that you can take a little risk and play a few for some fat income. Here is a sampling of utilities set to pay in the next couple weeks or so:
- NiSource (NI) pays 1% on Oct. 27
- Pinnacle West Capital (PNW) pays 1.14% on Oct. 28
- CMS Energy (CMS) pays 1% on Nov. 2
- FirstEnergy (FE) pays 1.2% on Nov. 3
- Southern Co. (SO) pays 1.08% on Nov. 3
- Northeastern Utilities (NU) pays 0.96% on Nov. 8
In a name somewhat related to that sector, Kinder Morgan (KMI) will pay 1.03% on Oct. 27. Kinder Morgan is the management company running the limited partnerships such as Kinder Morgan Energy Partner (KMP). I always play the "Inc." name and avoid the LP simply because the taxes are a nightmare. However, if that is not an issue, play the LPs. Kinder Morgan Energy is scheduled to pay out 1.52% on Oct. 27, as are similar names such as Enterprise Products Partners (EPD) at 1.39% and Magellan Midstream Partners (MMP) at 1.27%.
A couple of others to dive into may be Paychex (PAYX), set to pay 1.11% on Oct. 28, and New York Community Bancorp (NYB), paying 2% on Nov. 3. The marginal sentiment on the economy is positive, which should help these two economically sensitive names hold up after the dividend is paid.