3 Dividend Stocks That Will Never Disappoint You

 |  Includes: AZN, BX, NLY
by: Fusion Research

High dividend paying stocks are all-time favorites among income investors. Since the beginning of 2013, large cap dividend stocks have created more investing buzz among all dividend stocks. This is mainly due to the investors' confidence in their business model as well as their sustainable earning capacity.

In contrast to my earlier piece last month, where I screened a few dividend stocks which you should avoid, this time I made an attempt to find the best dividend stocks an investor should consider while making their investment choice. Scouring the investment landscape, I have selected three such companies which have succeeded in rewarding investors with a dividend yield of above 7%.


Forward Dividend Yield

Annaly Capital Management, Inc. (NYSE:NLY)


The Blackstone Group (NYSE:BX)


AstraZeneca PLC (NYSE:AZN)


Click to enlarge

Source: YahooFinance


In the past, Astra had its share of loss due to patent expirations of its revenue generating drugs - Arimidex in 2010, Seroquel in 2011, and Symbicort in 2012. Also, Iressa and Nexium are expected to be patent free in 2013 and 2014 respectively. Despite all this, the company's pipeline looks attractive-- giving hope for future sales. Last month, in its analysts meeting, it laid emphasis on achieving growth via existing products and future product pipeline.

Astra is re-positioning one of its flagship products, Brilinta, to achieve leadership in acute coronary syndrome (ACS) and oral anti-platelets. The company is focusing on troponin patients which form around 85% of the trial patient group. Moreover, the PEGASYS study for Brilinta for secondary prevention is expected to be completed in 2015, which will further open up a post ACS market for the drug. I feel with adequate support, Astra can accelerate Brilinta's profitability in the U.S. market and I see this as a compelling opportunity for the company in longer run.

Additionally, Astra remains on track with its restructuring plan. Phase four of this plan will involve a global headcount reduction of more than 5000 during 2013 to 2016. And hence, the net P&L benefits left for R&D is expected to be around $190 million, and around $610 million in SG&A. Eventually, this will lead to a total benefit of $800 million with around 50% of it to be realized by 2014. The company has already indicated that half of this realization will be reinvested back into business and the remaining half will be used towards its shareholders.

The Blackstone Group

In March 2013, Blackstone along with Carl Ichan submitted rival bids for an alternative takeover of Dell Inc. (NASDAQ:DELL). For about 60% of the company's stake, Icahn offered $15 per share, whereas Blackstone was ready to pay more than $14.25. Looking at the current options, I feel Blackstone is emerging as the most rational candidate for the bidding process. However, both Dell and Blackstone are currently stuck on the point where Mr. Dell is opposing Blackstone's plan to sell out Dell's financial arm valued at $5 billion to fund the takeover. On the other hand, Michael Dell wants to keep his business intact and focus on emerging markets for future growth. With the closure of this deal, Blackstone's stock will continue with its momentum of the last six months with a return of around 38%.

On a different note, I am bullish on Blackstone considering its outlook for the real estate segment. As the market is coming out of the credit crisis, realizations on investments are improving. Blackstone completed around 57 real estate monetization deals in fourth quarter of 2012, which was higher than the total of 55 for first nine months. This clearly highlights the strong momentum of realization activity in 2013. Additionally, Blackstone purchased around $4 billion worth of foreclosed homes in last two years. Further, it expects to spend $4 billion on homes and is seeking additional loans for these purchases. Blackstone is buying single-family homes at the rate of $100 million per week, which is highest among all other buyers. This buying spree has led to around 20,000 homes for Blackstone, which will help it to dominate the single family home market, with recovering prices. I believe the recovery in home prices, and the company's activities will support its earnings in the future.

Annaly Capital Management

After sequential reduction of its dividend by $0.05 in the last two quarters, another reduction was expected from Annaly this quarter as well. But belying such fears, the company declared the same dividend it declared in the last quarter. This should bring some positive movement in the stock, but what I am concerned about is the payout ratio in the last quarter. In the fourth-quarter of 2012 Annaly declared a dividend of $0.45 as compared to the core EPS of $0.32. As a REIT, there is a mandatory requirement for the company to disburse at least 95% of its earnings. But such a high dividend payout can jeopardize the future liquidity of the company.

Looking at the positives, the company can invest up to 25% of its equity capital outside of agency MBS. It will invest roughly 6% of its equity capital allocated to commercial real estate with the acquisition of CreXus Investment Corp. (CXS). Annaly recently initiated the process of acquiring 100% shares of Crexus, another REIT in which it holds a substantial stake. It will pay $13.00 plus a sum approximating a pro-rated portion of the CreXus dividend for the first-quarter of 2013 as compensation per share. I like what this deal brings to the table for both campers. Diversification for Annaly with about $1.08 billion investment in the pipeline is actionable in the near-term, and that should immediately be accretive to both its taxable earnings as well as dividend. And, Crexus shareholders will get a decent premium for their shares which have struggled hard in the past to trade above book value.


I view Annaly Capital as a risk-return rewarding opportunity. Its acquisition of CreXus Investment will provide increment to both earnings as well as dividend. For Blackstone, the recovering real estate market will come as a boon. Its strong portfolio of single-family homes and realization activity will be the pillars for future growth. As far as AstraZeneca is considered, it is the highest dividend payer among big pharma companies. Moreover, its solid pipeline of products and restructuring plan provides enough support to the stock.

I recommend buying all of them.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.