What could be the best scenario for a dividend investor?
When I think about dividend investing, I think about the possibility of receiving a dividend payout forever. After all, the “perfect dividend stock” is paying a distribution quarterly and show the possibility of increasing this payment year after year. I went on doing some research based on a few data inspiring sustainable dividend over time.
Which Ratios Lead to Safe Dividend Payouts?
From a stock screener, I’ve pulled out the following metrics:
Dividend yield over 3%
Dividend payout ratio under 70%
P/E ratio under 20
5yr Earnings per share growth over 10%
5yr Sales growth over 10%
Return on Equity over 10%
I’m guessing that a stock showing low payout ratio, low P/E ratio but with high EPS, sales and ROE growth would be a strong candidate to be in any dividend investor portfolio. I’ve pulled off 17 stocks from this search. Here’s the list and data details at the bottom. Tell me what you think; I’m curious to hear your thoughts about those stocks…
Intersections Inc. (INTX) 8.52% Dividend Yield. Intersections provide protection against identify theft or fraud. It also helps consumers to track their credit report and protect personal information. Note the stock is on a slump due to significantly negative revenue guidance (-15%) as new regulations restraint financial services companies marketing its products.
H&Q Healthcare Investors (HQH) 6.95% Dividend Yield. HQH is a closed-end management investment company who invests mainly in biotechs, medical devices and pharmaceuticals. The stock is up by more than 30% for the past 12 months.
Alliance Resource Partners LP (ARLP) 6.72% Dividend Yield. Alliance Resource is a producer and marketer of coal products in the USA. The company is believed to beat analysts’ estimates for net earnings but be short on gross revenues.
RF Industries Ltd. (RFIL) 6.55% Dividend Yield. RF industries is specialized in coaxial and speciality cables. It designs, markets, manufactures interconnect products. The stock exploded by 72% for the past 12 months.
Eaton Vance Short Duration Diversified Income Fund (EVG ) 6.28% Dividend Yield. Eaton Vance is another closed-end management investment company. It seeks high level of income with a dividend yield over 6% at the moment. The fund invests in several different sectors.
Main Street Capital Corporation (MAIN) 6.06% Dividend Yield. Main is an investment firm providing debt and equity financing to companies with annual revenues between 10M$ and 100M$. The stock has beaten the analyst estimates for the past 5 quarters.
TAL International Group, Inc. (TAL) 6.00% Dividend Yield. Tal International lease and trade containers and chassis. We can expect this company to continue its growth along with the economy.
Icahn Enterprises, L.P. (IEP) 5.72% Dividend Yield. IEP is a diversified holding company. It was in the center of RIM acquisition early in 2012. Despite its 5yr metrics, the stock is down 13% for the past 12 months.
Newmont Mining Corp. (NEM) 5.03% Dividend Yield. Newmont is a gold producer known to be the first company to determine their dividend payout according to an underlying asset (e.g. the price of gold). Since gold price is on a slump this gold producer follows the trend.
Cal-Maine Foods, Inc. (CALM) 4.07% Dividend Yield. Cal-Main produces eggs in the USA. Its activities range from production, grading, packaging, marketing and distributing eggs across the states. Following other food related stocks, CALM is up by 19% for the past 12 months.
Quality Systems Inc. (QSII) 3.83% Dividend Yield. Quality Systems develops and markets healthcare information system. While the 5yr stats are great, a deeper look into recent financial results would be required. The stock is down 56% for the past 12 months and has produced results under analysts’ estimates for the last three quarters.
The Female Health Company (FHCO) 3.71% Dividend Yield. Female Health produces and markets FC2 female condom. This condom is effective against pregnancy and also sexually transmitted infections. The stock is on fire (+40% over 12 months) after great Q4 results and shares repurchase program.
Coffee Holding Co.Inc. (JVA) 3.65% Dividend Yield. Coffee holding is… obviously a coffee roaster and dealer in the USA. They sell private-label along with branded coffee labels. The stock has been recently disappointing with a drop of 28% during the current bull market.
Questcor Pharmaceuticals, Inc. (QCOR) 3.63% Dividend Yield. Questcor is a biopharmaceutical company specialized in treatment of autoimmune and inflammatory disorders. As it’s the case with many pharmaceuticals, Questcor is dependent of its products performance. In November 2012, its top selling drug would face serious competition from Cerium pharmaceuticals. The stock is down 32% for the past 12 months.
FutureFuel Corp. (FF) 3.52% Dividend Yield. FutureFuel produces chemical and biofuels. It’s definitely a great industry for the… future ;-).
Homeowners Choice, Inc. (HCI) 3.48% Dividend Yield. Homeowners is another holding company specialized in property and casualty insurance business. The company seems to continue on a uptrend as it has beaten analysts estimates for the past 5 quarters.
Sunoco Logistics Partners L.P. (SXL) 3.47% Dividend Yield. Sunoco Logistics manage an important portfolio of pipelines. This is definitely a hot sector at the moment and the stock has boomed by 63% for the past 12 months.
As you can see, a few metrics and a stock filter is not enough to make sure you have found a great dividend growth stocks. If you hold or research any of those companies, please let us know!
No. Ticker Company Sector P/E Dividend Yield Payout Ratio EPS growth past 5 years Sales growth past 5 years Return on Equity
1 ARLP Alliance Resource Partners LP Basic Materials 10.77 6.72% 68.00% 10.14% 14.51% 23.99%
2 CALM Cal-Maine Foods, Inc. Consumer Goods 10.91 4.07% 33.43% 19.26% 13.23% 18.78%
3 EVG Eaton Vance Short Duration Diversified Income Fund Financial 10 6.28% 0.00% 52.36% 58.32% 16.93%
4 FF FutureFuel Corp. Basic Materials 13.44 3.52% 42.63% 58.12% 68.16% 13.25%
5 FHCO The Female Health Company Consumer Goods 13.46 3.71% 40.17% 55.55% 12.64% 78.06%
6 HCI Homeowners Choice, Inc. Financial 8.23 3.48% 27.47% 59.34% 84.34% 31.71%
7 HQH H&Q Healthcare Investors Financial 3.56 6.95% 21.74% 12.86% 18.32% 35.50%
8 IEP Icahn Enterprises, L.P. Financial 19.76 5.72% 9.62% 67.55% 44.43% 8.48%
9 INTX Intersections Inc. Services 7.96 8.52% 63.49% 14.32% 16.08% 19.79%
10 JVA Coffee Holding Co.Inc. Consumer Goods 17.78 3.65% 31.17% 17.41% 24.80% 10.92%
11 KINS Kingstone Companies, Inc. Financial 6.46 3.02% 13.79% 58.57% 31.21% 19.87%
12 MAIN Main Street Capital Corporation Financial 8.68 6.06% 49.02% 64.17% 48.64% 19.91%
13 NEM Newmont Mining Corp. Basic Materials 8.96 5.03% 36.87% 20.33% 12.55% 14.14%
14 QCOR Questcor Pharmaceuticals, Inc. Healthcare 8.72 3.63% 11.90% 43.57% 59.22% 103.59%
15 QSII Quality Systems Inc. Technology 17.6 3.83% 67.14% 16.26% 22.29% 20.51%
16 RFIL RF Industries Ltd. Technology 17.97 6.55% 53.12% 17.58% 15.27% 13.15%
17 SXL Sunoco Logistics Partners L.P. Basic Materials 14.8 3.47% 42.40% 30.47% 12.16% 14.14%
18 TAL TAL International Group, Inc. Services 11.02 6.00% 60.69% 27.20% 11.41% 22.08%
19 WSCI WSI Industries Inc. Industrial Goods 8.06 3.20% 25.84% 13.39% 11.53% 16.01%
Disclaimer: I do not hold any stocks mentioned in this article. Further analysis is required before trading.
How about ‘High Arctic Energy Services’ at toronto exchange ? It has yield – 6.2%, EPS = $0.59. Payout ratio = 25% only !!
Hey Bob,
is it me or the stock just started on the public stock market? I can get an history on Google Finance