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Investing Specialists

Top 10 Dividend-Yielding Stocks of Our Ultimate Stock-Pickers

Our top managers continue to focus on higher-quality businesses rather than seeking out bargains in a market that (in many of their minds) has become fully valued.

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By Greggory Warren | Senior Stock Analyst

The U.S. equity markets were exceptionally strong during 2013, with the S&P 500 TR Index rising more than 32% to an all-time high (and the benchmark posting its biggest annual gain since the late 1990s). That said, some of the more defensive categories in the index, which have traditionally been the source of higher dividend yields for investors, had a noticeable lag in their performance. The Utilities sector, for example, which has traditionally been the highest yielding sector in the S&P 500, generated a total return of about 13% last year, as investors pushed up the value of less defensive sectors, like Financial Services, Industrials, and Consumer Cyclicals. While not as dire as the underperformance of the Utilities sector, Consumer Defensive stocks also fell short of the performance of the market as a whole, with the sector posting a 26% gain for the year. Even so, the rise in the value of the stock market as a whole has left price/earnings ratios at much higher levels, leaving relatively few bargains out there for investors.

The Morningstar Ultimate Stock-Pickers Team has a position in the following securities mentioned above: PM, PG, MDLZ. Find out about Morningstar’s editorial policies.