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Arie Goren, Portfolio123 (475 clicks)
Long only, value, research analyst, dividend investing
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I have searched for highly profitable companies that pay rich dividends and that have raised their payouts at a very high rate for the last year, last three years and last five years. Companies that regularly increase dividends are generally more stable. Increasing dividends is the assurance that dividend income retains its purchasing power over time.

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. All the data for this article were taken from Yahoo Finance and finviz.com. The screen's formula requires all stocks to comply with all following demands:

  1. The forward dividend yield is greater than 2.2%.
  2. The payout ratio is less than 25%.
  3. The annual rate of dividend growth over the last year is greater than 8%.
  4. The annual rate of dividend growth over the past three years is greater than 14%.
  5. The annual rate of dividend growth over the past five years is greater than 8%.
  6. Price to free cash flow for the trailing 12 months is less than 14.
  7. Trailing P/E is less than 17.
  8. Forward P/E is less than 13.

After running this screen on July 12, 2013, before the market open, I discovered the following three stocks:


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AFLAC Inc. (AFL)

Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products.

Aflac has a very low debt (total debt to equity is only 0.28), and it has a very low trailing P/E of 9.36 and a very low forward P/E of 9.10. The price to free cash flow for the trailing 12 months is extremely low at 1.89, and the average annual earnings growth estimates for the next five years is at 6.92%. The forward annual dividend yield is at 2.36%, and the payout ratio is only 21%. The annual rate of dividend growth for the last year was at 8.94%, for the last three years was at 16.84%, and over the past five years was at 16.85%.

The AFL stock price is 3.34% above its 20-day simple moving average, 5.67% above its 50-day simple moving average and 14.36% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

AFL will report its latest quarterly financial results on July 29. AFL is expected to post a profit of $1.51 a share, a 7% decline from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

The compelling valuation metrics, the solid dividend, the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend are all factors that make AFL stock quite attractive.

AFL Dividend Chart
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Chart: finviz.com

Seagate Technology Public Limited Company (STX)

Seagate Technology Public Limited Company designs, manufactures, markets, and sells hard disk drives for enterprise storage, client compute, and client non-compute market applications worldwide.

Seagate Technology has a very low trailing P/E of 7.45 and a very low forward P/E of 8.49. The price to free cash flow for the trailing 12 months is extremely low at 4.15. The forward annual dividend yield is quite high at 3.28%, and the payout ratio is only 20%. The annual rate of dividend growth for the last year was very high at 63%, for the last three years was also very high at 47.13%, and over the past five years was at 17.75%.

The STX stock price is 4.76% above its 20-day simple moving average, 8.25% above its 50-day simple moving average and 35.54% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

STX will report its latest quarterly financial results on July 24. STX is expected to post a profit of $1.18 a share, a 51% decline from the company's actual earnings for the same quarter a year ago.

The very low multiples, the solid dividend, the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend are all factors that make STX stock quite attractive.

STX Dividend Chart
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Chart: finviz.com

Schweitzer-Mauduit International Inc. (SWM)

Schweitzer-Mauduit International, Inc. manufactures and sells paper and reconstituted tobacco products to the tobacco industry; and specialized paper products for use in various applications.

Schweitzer-Mauduit International has a low debt (total debt to equity is only 0.31) and it has a trailing P/E of 16.97 and a very low forward P/E of 12.99. The price to free cash flow for the trailing 12 months is very low at 13.81, and the average annual earnings growth estimates for the next five years is very high at 15%. The forward annual dividend yield is at 2.23%, and the payout ratio is only 22%. The annual rate of dividend growth for the last year was very high at 50%, for the last three years was at 14.47%, and over the past five years was at 8.45%.

The SWM stock price is 6.0% above its 20-day simple moving average, 13.42% above its 50-day simple moving average and 35.99% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

SWM will report its latest quarterly financial results on July 30. SWM is expected to post a profit of $0.88 a share, a 7% rise from the company's actual earnings for the same quarter a year ago.

All these factors -- The very low multiples, the solid dividend, the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend - make SWM stock quite attractive.

SWM Dividend Chart
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Chart: finviz.com

Source: 3 Good Yielding Stocks That Have Raised Payouts By At Least 8% A Year For The Last 5 Years