Caution on Financials

Until 2008 and 2009, financial-services companies made up the backbone of most dividend-focused portfolios. Then many banks were forced to slash or eliminate dividends.

Shearer remains cautious on financial stocks, though his fund owns JPMorgan Chase (JPM) and Wells Fargo (WFC), which "have not fully restored their dividends." "We do have concerns about what the earnings power will be," he says, noting new regulations and the fact that it's a "very competitive industry with 7,000 institutions." He prefers Canadian financial stocks such as the National Bank of Canada (NA:CN), which yields 4 percent. JPMorgan pays a 3 percent yield; Wells Fargo, 2 percent.