When income investor Jenny Harrington looks for top dividend stocks, names like Whirlpool come to mind. The home appliance manufacturer not only has a 6% dividend yield, but it has also gotten very cheap, Harrington said. Finding companies with low valuations is a part of her strategy. “I am frequently drawn towards companies where there has been something that knocked the share price down and created what I consider to be an unnaturally low valuation,” said Harrington, CEO of Gilman Hill Asset Management. Of course, income is a key consideration: She buys names that have a “reasonably high dividend yield” for her portfolio, which typically generates a 5% dividend yield or better. “We specifically focus on dividend income rather than dividend growth because the objective of our portfolio is to generate a strong and sustainable income stream for our clients,” Harrington said. WHR 1Y mountain Whirlpool’s one-year performance She would also like to see the potential for earnings growth in the names she buys. However, investors need to be patient, she said. For instance, last year was mostly painful for dividend stocks because all the capital appreciation came at the end of the year, she said. “You have to be long-term focused because the returns don’t come to you in short pops,” Harrington said. “They come to you in the compounding of the accumulation of the dividends.” This year has also gotten off to a slow start, she noted. The Dow Jones U.S. Select Dividend index , which tracks the performance of 100 high dividend-paying companies, is up roughly 2% year to date. In comparison, the S & P 500 has gained 9% so far this year. Still, investors are compensated with juicy dividend yields. For instance, the iShares Select Dividend ETF (DVY) , which tracks the Dow Jones U.S. Select Dividend index, currently has a 30-day SEC yield of 4%. Here are some of the names Harrington likes right now and owns in her portfolio. Crown Castle , a real estate investment trust that owns and operates cell towers, has a 6% yield and is trading at 15 times forward funds from operations (FFO), Harrington said. While the company has been facing earnings headwinds, they should abate in the next 12 to 24 months, she said. Then earnings should then rise toward a mid-single digit growth rate, she added. “Temporary earnings compression from industry-wide impacts, plus Elliott’s activist campaign, will combine to bring to light the high value critical towers assets of CCI, with reliable earnings growth beginning in 2026,” Harrington said. Activist fund Elliott Investment Management launched a campaign in November , pushing for leadership change and enhanced corporate governance, as well as a review of its fiber business. In December, CEO Jay Brown announced he would retire , and board member Anthony Melone was named interim CEO. Crown Castle is now in a fight with co-founder Ted Miller over board seats. Shares are down about 9% year to date. Meanwhile, Clearway Energy A shares yield more than 7%. The renewable energy company is trading at 10 times forward cash available to distribution and is down 18% so far this year, she said. Clearway Energy is what’s known as a yieldco, which are essentially companies that own and operate up-and-running low carbon energy assets and focus on paying dividends to investors. “Carnage in the yieldco space compressed valuations while poor weather compressed earnings in 2023, but Clearway has quality assets, is well capitalized with funded dividend growth over the next couple years and we believe is attractively priced,” Harrington said. Another Harrington favorite is diversified technology company 3M , which currently has a 5.8% yield. The payout will drop after the company spins off Solventum (SOLV) on April 1, but Harrington expects the majority of the yield will stay with 3M. Earlier this month, the company said William Brown, the former CEO of L3Harris Technologies, will become 3M’s new CEO effective May 1 . The company also announced on Tuesday that the lawsuit settlement for its earplugs has moved to a final resolution. 3M has agreed to pay up to $6 billion in total to claimants they suffered from hearing loss after using the product. “Litigation is better understood, and the business is organically stable,” Harrington said. “This, in combination with the spin of SOLV in April, should highlight how cheap this industrial stalwart has gotten.” The stock has lost nearly 5% year to date. Lastly, Whirlpool is trading under eight times EPS, she pointed out. The company is the leading operator in an industry that is temporarily cyclically challenged. However, Whirlpool has a solid balance sheet, as well as an attractive and covered dividend that will support investors’ returns until the company’s earnings growth comes back, she said. Shares of Whirlpool are down about 3% so far this year.
Source Agencies
