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Durable Dividends

Durable Dividends

Ben Steverman

Dividends are especially valuable in a drooping stock market. Fearful investors get reliable income from their stocks even if share prices are stagnant or slide even lower.

The problem, though, is that companies previously generous with dividends are
Standard & Poor's predicts dividends for firms in the S&P 500 will fall 13.3% in 2009.

Still, many firms are strong enough to maintain and even increase their dividend payments. BusinessWeek asked portfolio managers and other investing experts to recommend stocks with secure payouts. We've designated stocks either "very safe" or "probably safe", reflecting the higher risk associated with some stocks, which usually also have more generous payouts. Of course, there's a caveat: In this environment, no dividend is completely safe.

Data in the slides are provided by Capital IQ and S&P Compustat, both of which, like BusinessWeek, are units of The McGraw-Hill Companies. Dividend yield measures the size of the dividend compared to the stock price. A high dividend yield means more income for investors, but also reflects the market's assessment that the dividend has a higher risk of being cut. Payout ratio measures the percentage of earnings that are needed to pay the dividend. The higher the ratio, the less likely the dividend is to be sustainable over the long haul.

Here are the companies that the pros picked: