I have searched for very profitable companies that pay very rich dividends. I also looked for companies that are in short-term uptrend, in mid-term uptrend and in long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.
I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.
The screen's formula requires all stocks to comply with all following demands:
- Dividend yield is greater than 4.9%.
- The payout ratio is less than 85%.
- Trailing P/E is less than 18.
- Forward P/E is less than 15.
- Stock price is above 20-day simple moving average (short-term uptrend).
- Stock price is above 50-day simple moving average (mid-term uptrend).
- Stock price is above 200-day simple moving average (long-term uptrend).
After running this screen on February 25, 2013, before the market open, I discovered the following three stocks:
Arlington Asset Investment Corp. (AI)
Arlington Asset Investment Corp., an investment firm, acquires mortgage-related and other assets. The company acquires on a leveraged basis residential mortgage-backed securities that are issued by the United States government agency, guaranteed as to principal and interest by U.S. government agencies, or U.S. government-sponsored entities.
Arlington Asset Investment has a very low trailing P/E of 1.37 and a very low forward P/E of 7.15. The forward annual dividend yield is very high at 13.63% and the payout ratio is only 23.2%.
The AI stock is trading 5.18% above its 20-day simple moving average, 12.73% above its 50-day simple moving average, and 20.16% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On February 6, Arlington Asset Investment Corp. Reported its fourth-quarter and full-year 2012 financial results. The company reported non-GAAP core operating income of $16.7 million for the quarter ended December 31, 2012, or $1.25 per share. On a GAAP basis, the company reported net income of $175.8 million for the quarter ended December 31, 2012, or $13.21 per share, compared to net income of $3.1 million for the quarter ended September 30, 2012, or $0.31 per share, and net income of $6.9 million, or $0.89 per share, for the quarter ended December 31, 2011. In the report, J. Rock Tonkel, Jr., the company's president and chief operating officer said:
This was another quarter and year of steady progress for Arlington. Our agency-backed MBS portfolio continues to record low prepayment speeds and attractive cash returns with protection against higher rates from the Company's substantial hedge position extending through September 2018. As the year progressed we became increasingly selective in new investments, but we continue to see attractive opportunities across our business. After taking advantage of opportunities around year-end to increase our private-label MBS exposure, as of today, Arlington now has approximately two-thirds of its investable capital allocated to prime credit, deep discount, private-label MBS. Credit performance has continued to improve in this portfolio for several quarters, and as the positive implications of the housing recovery have begun to be recognized, risk spreads have declined and we have observed continued price appreciation since year-end for private-label MBS like ours.
The cheap valuation, the very rich dividend, the solid fourth-quarter financial results, and fact that the stock is in an uptrend are all factors that make AI stock quite attractive.
Altria Group Inc. (MO)
Altria Group, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally.
Altria has a trailing P/E of 17.15 and a very low forward P/E of 13.69. The forward annual dividend yield is very high at 4.98% and the payout ratio is at 82.5%.
The MO stock price is 3.14% above its 20-day simple moving average, 6.57% above its 50-day simple moving average and 7.42% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.
On January 31, Altria Group Reported its fourth-quarter and full-year 2012 financial results.
Fourth-quarter 2012 Highlights
- Altria's 2012 fourth-quarter reported diluted earnings per share (EPS) increased 34.1% to $0.55, as comparisons were impacted by special items
- Altria's 2012 fourth-quarter adjusted diluted EPS, which excludes the impact of special items, increased 10.0% to $0.55
- Altria's 2012 full-year reported diluted EPS increased 25.6% to $2.06, as comparisons were impacted by special items
- Altria's 2012 full-year adjusted diluted EPS, which excludes the impact of special items, grew 7.8% to $2.21
- Altria forecasts that 2013 full-year reported diluted EPS will be in the range of $2.34 to $2.40, and 2013 full-year adjusted diluted EPS will be in the range of $2.35 to $2.41, representing a growth rate of 6% to 9% from an adjusted base of $2.21 in 2012
In the report, Marty Barrington, chairman and chief executive officer of Altria said:
Altria delivered strong results and returns for its shareholders in 2012. Altria grew its full-year adjusted diluted earnings per share by 7.8% behind the business performance of our operating companies, complemented by higher earnings from our equity investment in SABMiller. Despite a continuing, challenging external environment, our tobacco operating companies' premium brands had an excellent year as our companies continued investing in their long-term success. These companies grew their adjusted operating companies income and gained retail share in cigarettes, cigars and smokeless tobacco for the full year of 2012.
The cheap valuation, the very rich dividend, the good fourth-quarter financial results, and fact that the stock is in an uptrend are all factors that make MO stock quite attractive.
BCE, Inc. (BCE)
BCE Inc. provides wire line, wireless, Internet, and television services to residential, business, and wholesale customers primarily in Canada.
BCE, Inc. has a very low trailing P/E of 12.89 and a low forward P/E of 14.18. The forward annual dividend yield is very high at 5.17% and the payout ratio is at 67%.
The BCE stock price is 0.34% above its 20-day simple moving average, 1.96% above its 50-day simple moving average and 5.77% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.
On February 04, BCE Inc. reported its fourth-quarter and full-year 2012 financial results, which missed EPS expectations by $0.01 and were in-line on revenues. In the report, the company announced a $0.06 per share increase in its annual common share dividend to $2.33. The company also said:
Today's dividend announcement represents BCE's ninth increase to the annual common share dividend, representing a 60% overall increase since the fourth quarter of 2008. The BCE annual common share dividend will increase from $2.27 to $2.33 per share effective with BCE's Q1 2013 dividend, payable on April 15, 2013 to shareholders of record at the close of business on March 15, 2013. Together with the earlier $0.10 per share increase announced on August 8, 2012, BCE's annual common share dividend increase for 2013 is up 16 cents or 7.4%. The higher dividend for 2013 is supported by substantial free cash flow generation and our positive business outlook for 2013.
The cheap valuation metrics, the solid fourth-quarter 2012 results, the rich dividend and the fact that the company consistently raises dividend payments are all factors that make BCE stock quite attractive.
Disclosure: I am long AI.