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, Portfolio123 (1,865 clicks)
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I have searched for very profitable companies that pay rich dividends and have raised their payouts at a high rate for the 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 2.60%.
  2. The payout ratio is less than 60%.
  3. The annual rate of dividend growth over the past three years is greater than 8%.
  4. The annual rate of dividend growth over the past five years is greater than 10%.
  5. Average annual earnings growth estimates for the next five years is greater or equal 10%.
  6. Forward P/E is less than 14.
  7. Total debt to equity is less than 0.70.

After running this screen on August 13, 2013, before the market open, I discovered the following four stocks:

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Broadridge Financial Solutions, Inc. (NYSE:BR)

Broadridge Financial Solutions, Inc. provides technology solutions to the financial services industry in the United States, Canada, and the United Kingdom.

Broadridge Financial Solutions has a trailing P/E of 18.40 and a low forward P/E of 13.90. The price to free cash flow for the trailing 12 months is at 28.11, and the average annual earnings growth estimates for the next five years is quite high at 10.50%. The forward annual dividend yield is at 2.63%, and the payout ratio is only 42%. The annual rate of dividend growth over the past three years was high at 8.74% and over the past five years was very high at 24.57%.

Broadridge Financial Solutions has recorded revenue, EPS and dividend growth during the last year, the last three years and the last five years, as shown in the table below.

Source: Portfolio123

The BR stock price is 8.29% above its 20-day simple moving average, 13.33% above its 50-day simple moving average and 27.37% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On August 08, Broadridge Financial Solutions reported its fourth-quarter fiscal year 2013 financial results, which beat EPS expectations by $0.07 and beat on revenues.

In the report, Richard J. Daly, Chief Executive Officer, said:

Overall, I am very pleased with our record earnings per share results for the quarter and full year. Both of our business segments ended the year with positive momentum and are positioned to grow both top and bottom line going forward. We also achieved record closed sales which included the signing of Societe Generale Corporate & Investment Banking as the first Eurasian processing client on our newly formed strategic alliance with Accenture. In addition, Broadridge's overall closed sales continue to grow primarily due to our emerging and acquired products, including our Fluent suite of digital services. Adding both the Accenture Eurasia strategic alliance and the Broadridge Fluent digital opportunities has created a very meaningful increase to our already strong sales pipeline. We opportunistically repurchased approximately 9 million shares, or 7% of our total shares outstanding for the fiscal year 2013. Given our confidence in the future, the Board has raised our annual dividend by approximately 17% to $0.84 per share. Our strong free cash flow enabled us to increase our dividend for the sixth consecutive year, and allows us to continue to actively pursue strategic tuck-in acquisitions and invest in our business to create increased revenue and earnings momentum going forward.

In my opinion, BR stock is quite attractive.

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Chart: finviz.com

Invesco Ltd. (NYSE:IVZ)

Invesco Ltd. is a publicly owned investment manager. It primarily provides its services to institutional clients including major public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, and financial institutions.

Invesco has a trailing P/E of 19.34 and a low forward P/E of 13.59. The PEG ratio is quite low at 1.27, and the average annual earnings growth estimates for the next five years is very high at 15.20%. The forward annual dividend yield is at 2.79%, and the payout ratio is at 54%. The annual rate of dividend growth over the past three years was very high at 16.24% and over the past five years was also high at 11.46%.

Invesco has recorded strong revenue, EPS and dividend growth during the last year, and the last three years, as shown in the table below.

Source: Portfolio123

On July 31, Invesco reported its second-quarter financial results.

Second-Quarter 2013 Highlights

  • Adjusted operating income increased 26.9% compared to Q2 2012
  • Adjusted operating margin improved to 39.3%
  • Adjusted diluted EPS of $0.50
  • Total Q2 shareholder return of capital of $176.7 million

In the report, Martin L. Flanagan, president and CEO of Invesco said:

Invesco's focus on delivering strong, long-term investment performance to our clients contributed to a 26.9% increase in operating income in the second quarter compared to the same period last year. Strong investment performance and a continued focus on meeting client needs drove positive long-term net flows during the quarter and helped the firm strengthen its operating margin to 39.3% from 35.7% a year ago.

In my opinion, IVZ stock is quite attractive.

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Chart: finviz.com

Janus Capital Group, Inc. (NYSE:JNS)

Janus Capital Group, Inc. is a publicly owned asset management holding company with approximately $167.7 billion in assets under management.

Janus Capital has a low debt (total debt to equity is only 0.38), and it has a trailing P/E of 17.11 and a low forward P/E of 13.45. The price to free cash flow for the trailing 12 months is very low at 12.09, and the average annual earnings growth estimates for the next five years are quite high at 12.93%. The price to book value is quite low at 1.17, and the price to cash ratio is very low at 2.25. The forward annual dividend yield is quite high at 3.03%, and the payout ratio is at 52%. The annual rate of dividend growth over the past three years was very high at 79.15% and over the past five years was also very high at 41.88%.

On July 25, Janus Capital reported its second-quarter financial results. The company reported second-quarter net income of $15.8 million, or $0.08 per diluted share, compared with first quarter 2013 net income of $28.0 million, or $0.15 per diluted share, and net income of $23.4 million, or $0.13 per diluted share, in the second quarter of 2012. Second-quarter 2013 revenues of $215.8 million increased from first-quarter 2013, primarily due to higher investment management fee revenue, partially offset by lower private account performance fees. Second-quarter 2013 operating expenses of $157.4 million decreased $2.1 million, or 1.3%, from first-quarter 2013, primarily due to lower long-term incentive compensation expenses.

As part of its capital management, JCG repurchased 1,036,934 shares of its common stock at an average price of $8.74 per share and a total cost of $9.1 million during the second quarter of 2013.

On July 22, 2013, JCG's Board of Directors declared a regular quarterly cash dividend of $0.07 per share. The quarterly dividend will be paid on August 23, 2013, to stockholders of record at the close of business on August 9, 2013.

In my opinion, JNS stock is a good investment right now.

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Chart: finviz.com

KLA-Tencor Corporation (NASDAQ:KLAC)

KLA-Tencor Corporation engages in design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries worldwide.

KLA-Tencor has a low debt (total debt to equity is only 0.21), and it has a trailing P/E of 18.36 and a very low forward P/E of 12.44. The price to free cash flow for the trailing 12 months is quite low at 16.99, and the average annual earnings growth estimates for the next five years are quite high at 10%. The current ratio is very high at 5.10, and the price to cash ratio is very low at 3.33. The forward annual dividend yield is quite high at 3.06%, and the payout ratio is at 56%. The annual rate of dividend growth over the past three years was very high at 38.67% and over the past five years was also very high at 21.67%.

KLA-Tencor has recorded strong revenue, EPS and dividend growth during the last three years and the last five years, as shown in the table below.

Source: Portfolio123

On July 25, KLA-Tencor reported its fourth-quarter fiscal year 2013 financial results, which beat EPS expectations by $0.03 and beat on revenues. The company reported GAAP net income of $135 million and GAAP earnings per diluted share of $0.80 on revenues of $720 million for the fourth quarter of fiscal year 2013. For the year ended June 30, 2013, the company reported GAAP net income of $543 million and GAAP earnings per diluted share of $3.21 on revenues of $2.8 billion.

In the report, Rick Wallace, KLA-Tencor's president and CEO said:

In the fourth quarter, KLA-Tencor delivered another period of strong financial performance, maintaining our market leadership position and releasing new products focused on addressing our customers' challenges at the leading edge. These results highlight a continuation of the trend of high levels of process control adoption as the increasing cost and complexity associated with managing yields makes process control critical to our customers' success.

In my opinion, KLAC stock is a good investment right now.

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Chart: finviz.com

Disclosure: I am long JNS, KLAC. 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.