Building a High Dividend Yield, Low Beta Income Portfolio (Part 1)

For income investors wanting to go it alone, they should consider creating a portfolio of high dividend stocks with low beta.  This type of portfolio will provide a risk to reward profile during times of uncertainty in the markets.  By adding the component of a bullish outlook to the low beta stocks indicates these stocks can be held in a long-term portfolio.  The high dividend yield can be compounded over time and will increase as these stocks raise their dividends each year.  This portfolio will be built in a series of articles.  Here are the first stocks to look at for your portfolio.

AT&T Inc. (T) provides telecommunications services to consumers, businesses, and other providers worldwide.   We see gains in consumer wireless and broadband continuing to offset some wireline voice pressure.  We believe T’s strong balance sheet, expected wide operating margins in 2012 and its review of rural assets are positives. While we think that failure to complete its planned acquisition of T-Mobile USA assets represents a setback, we believe T will move forward and has sufficient spectrum and liquidity to grow. We view T’s above-average dividend as secure and adding to total return potential, though with a rise in the shares in 2012.  T has a dividend yield of 5.69% and a 3-year beta of 0.58.  T has an equity summary score of 9.2 out of 10 for a VERY Bullish outlook.  The First Call Consensus of 37 analysts is a Buy rating.

Altria Group, Inc. (MO) engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally.  Although we continue to expect domestic cigarette industry volumes to contract over the long term, we see cigarette companies still having the ability to raise prices,
and thus margins.  As the largest U.S. cigarette manufacturer, MO should lead this pricing strategy, in our view.  Moreover, we look for more limited commodity input cost pressures than in other industries in the consumer staples sector.  Operationally, we think Altria is likely to benefit from several factors over the next several years, including the growth from higher-margin smokeless tobacco products and various restructuring actions.  MO has a dividend yield of 5.23% and a 3-year beta of 0.44.  MO has an equity summary score of 7.6 out of 10 for a Bullish outlook.  The First Call Consensus of 14 analysts is a
Buy rating.

Verizon Communications Inc. (VZ) provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide.  VZ is a large, steady high yield dividend stock.  It boasts a dividend yield of 5.3% and a 3-year beta of 0.54.  VZ has a
strong operating margin and perception of network quality, the company’s wireless segment should be a driver for VZ in 2012, even as we see higher
subsidies for smartphones launched on 3G and 4G networks.  We are encouraged by the relative stability in VZ’s wireline segment over the past six months, helped by FiOS gains and by the company’s above-average dividend. We believe VZ’s pending acquisition of spectrum from a cable consortium will help alleviate future network congestion. VZ has an equity summary score of 8.9 out of 10 for a Bullish outlook.  The First Call Consensus of 39 analysts is a
Buy rating.