With the market resuming its upward motion, now might be a good time to consider adding dividend stocks to your portfolio. Buying dividend paying stocks at low prices not only locks in the dividend yield at current prices but also packs the double whammy of price appreciation. To that end, I did a search on the MSN Money Central Stock Screener (free to everyone) to find high quality, high-dividend paying stocks. (The only tie I have to MSN Money Central is that it’s my home page.)
Here are my search criteria:
Stock price > $2
Average daily volume > 100,000 shares
Current dividend yield = as high as possible
Stock Scouter rating >= 8 (out of 10; based on expected 6 month return vs expected volatility. Top-rated stocks are expected to gain the most in the future with relatively less volatility. See site for more info on Stock Scouter ratings.)
I also displayed other parameters including dividend payout over the previous twelve months compared with five years ago. A twelve month figure greater than the five year figure indicates an increasing dividend—tough to do nowadays.
So, culled from the top 50 candidates and all having current dividend yields greater than 7.5%, here are my picks arranged into three tiers according to their chart technicals.
The top tier
All of the stocks in this tier are making new highs (click on chart to enlarge). The first two, Hattaras Financial (HTS) and American Capital Agency (AGNC), are making new all-time highs on better than normal volume. This is a really good sign of price continuation. The other three are making new relative highs on lower than normal volume. In this group, Telecom Corp. of New Zealand (NZT) is the only stock whose latest twelve month dividend payout is greater than its five year payout. There’s no stock where the reverse case was true because the rest of them have only been paying dividends for less than five years.
The second tier
These stocks have been in an up-trend but are currently off their highs. Many are well off their historic highs. Those whose twelve month dividend payouts are less than their five year payouts are Anworth (ANH), Capstead (CMO), and Nisource (NI). Those whose twelve month dividend payouts are greater than their five year payouts are CenturyTel (CTL), Lan Airlines (LFL), and Realty Income (O). The rest of the group has not been paying dividends for five years.
The third tier
These stocks have been trending upwards but may be stuck in a channel or are nearing resistance. Those whose twelve month dividend payouts are less than their five year payouts are Grupo Aeroportuario (ASR), Empire Electric (EDE) and Nustar (NS). Those whose twelve month dividend payouts are greater than their five year payouts are MFA Financial (MFA), PDL BioPharma (PDLI), Western Gas (WES), and Windstream (WIN). The rest of the group has not been paying dividends for five years.
You can see that most of these fall into the traditional high-dividend stock groups: REITs, mobile communications (still a huge field ripe for M&A activity), natural gas MLPs (UNG, the natural gas ETF, looks like it’s basing and possibly rebounding), and “specialized” airports (ASR and PAC in Mexico, and LFL in Columbia).
The latter are interesting precisely because they shouldn’t be. (Money laundering, off-shore tax havens...?) I am but a gringo–perhaps the subject of another article...?