I have searched for highly profitable companies that pay very rich dividends and that are in a short-term uptrend and in a mid-term uptrend. Stocks in an uptrend are performing well and are in a buying mode. Those stocks would also have to show a very low trailing and forward P/E ratio.
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:
- The forward dividend yield is greater than 3.90%.
- The payout ratio is less than 85%.
- Trailing P/E is less than 12.
- Forward P/E is less than 12.
- The stock price is above the 20-day simple moving average (short-term uptrend).
- The stock price is above the 50-day simple moving average (mid-term uptrend).
After running this screen on August 16, 2013, before the market open, I discovered the following four stocks:
Canadian Imperial Bank of Commerce (CM)
Canadian Imperial Bank of Commerce provides various financial products and services in Canada and internationally.
Canadian Imperial Bank has a very low trailing P/E of 9.69 and a very low forward P/E of 8.85. the PEG ratio is very low at 0.97, and the price-to-cash ratio is very low at 0.93. The price to free cash flow for the trailing 12 months is at 17.26, and the average annual earnings growth estimates for the next five years is quite high at 10%. The forward annual dividend yield is high at 4.81%, and the payout ratio is at 47%. The annual rate of dividend growth over the past three years was at 6.82%, and over the past five years was at 4.91%.
The CM stock price is 0.30% above its 20-day simple moving average and 2.63% above its 50-day simple moving. That indicates a short-term and mid-term uptrend.
CM will report its latest quarterly financial results on August 29. LO is expected to post a profit of $2.14 a share, a 4% rise from the company's actual earnings for the same quarter a year ago.
All these factors -- the very low multiples, the good earnings growth prospects, the very rich dividend, the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend -- make CM stock quite attractive.
Freeport-McMoRan Copper & Gold Inc. (FCX)
Freeport-McMoRan Copper & Gold Inc. engages in the exploration of mineral resource properties.
Freeport-McMoRan has a very low trailing P/E of 11.36 and even lower forward P/E of 10.16. The PEG ratio is at 1.49, and the average annual earnings growth estimates for the next five years is at 7.60%. The forward annual dividend yield is quite high at 3.92%, and the payout ratio is only 44%. The annual rate of dividend growth over the past five years was quite high at 12.70%.
The FCX stock price is 8.11% above its 20-day simple moving average, 11.37% above its 50-day simple moving average and 3.27% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On July 23, Freeport-McMoRan reported its second-quarter financial results. Net income attributable to common stock totaled $482 million, $0.49 per share for second-quarter 2013, compared with net income of $710 million, $0.74 per share, for second-quarter 2012. Net income attributable to common stock for the first six months of 2013 totaled $1.1 billion, $1.17 per share, compared with $1.5 billion, $1.55 per share, for the first six months of 2012.
On May 31, 2013, FCX's Board of Directors declared a supplemental common stock dividend of $1.00 per share, which was paid on July 1, 2013. This supplemental dividend, which totaled $1.0 billion, is in addition to FCX's regular quarterly dividend of $0.3125 per share and is the eleventh supplemental dividend paid by FCX since 2004, which have totaled $3.0 billion.
The compelling valuation metrics, the very rich 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 FCX stock quite attractive.
American Capital Mortgage Investment Corp. (MTGE)
American Capital Mortgage Investment Corp. operates as a real estate investment trust (REIT) in the United States.
American Capital Mortgage has a very low trailing P/E of 4.99 and a low forward P/E of 6.27. The price to book value is very low at 0.90. The forward annual dividend yield is very high at 16.32%, and the payout ratio is at 81%.
The MTGE stock price is 1.52% above its 20-day simple moving average and 4.93% above its 50-day simple moving average. That indicates a short-term and mid-term uptrend.
On July 30, American Capital Mortgage reported its second-quarter financial results.
SECOND QUARTER 2013 FINANCIAL HIGHLIGHTS
- $(0.94) per share of net loss
- Resulting mainly from $(5.05) per share in net unrealized losses on agency securities, partially offset by $3.68 per share in net unrealized gains on derivatives and other securities
- $1.05 per share of net spread and TBA dollar roll income
- Includes $0.40 per share of estimated net carry income (also known as "dollar roll income") associated with purchases of agency mortgage-backed securities ("MBS") on a forward-settlement basis through the "to-be-announced" ("TBA") dollar roll market
- Includes approximately $0.05 per share of "catch-up" premium amortization benefit due to change in projected constant prepayment rate ("CPR") estimates
- $0.76 per share of estimated taxable income
- Undistributed estimated taxable income of $0.43 per share as of June 30, 2013, down $(0.02) per share from $0.45 per share as of March 31, 2013
- $0.80 per share dividend declared on June 18, 2013
- $22.63 per share net book value as of June 30, 2013
- Decreased $(1.62) per share, or (6.7)%, from $24.25 per share as of March 31, 2013
- Driven primarily by wider spreads in the broader mortgage-backed securities market
- (3.4)% economic loss on equity for the quarter, or (13.5)% annualized
- Comprised of a $(1.62) per share decrease in net book value, partially offset by a $0.80 per share dividend
In the report, Gary Kain, President and Chief Investment Officer, commented:
This was a very volatile quarter for the entire fixed-income space. Agency MBS were at the eye of the storm as convexity hedging, fixed income fund withdrawals, changes to bank capital requirements, and changes in expectations surrounding future Fed accommodation combined to push rates higher and MBS spreads wider. Volatility in the non-agency sector picked up significantly late in the quarter, but the overall impact was muted by the positive momentum in the housing market. As a hybrid REIT, we seek a balance between the liquidity benefits of agency MBS and the yield advantages of non-agency MBS.
All these factors -- the extremely low multiples, the very rich dividend, the fact that the company is rich in cash ($5.47 a share), the fact that the stock is trading way below book value, and the fact that the stock is in an uptrend -- make MTGE stock quite attractive.
Tronox Limited (TROX)
Tronox Limited produces and markets titanium ore and titanium dioxide in the Americas, Europe, and the Asia-Pacific.
Tronox Limited has an extremely low trailing P/E of 1.50 and a very low forward P/E of 11.94. The current ratio is very high at 7.10, and the price-to-book-value ratio is quite low at 1.03. The price-to-cash ratio is very low at 1.85. The forward annual dividend yield is high at 4.45%, and the payout ratio is only 7%.
The TROX stock price is 3.30% above its 20-day simple moving average, 6.20% above its 50-day simple moving average and 14.76% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On August 07, Tronox Limited reported its second-quarter financial results.
Second Quarter 2013 Highlights:
- Revenue of $525 million, up 12 percent versus $470 million in first quarter 2013
- Adjusted EBITDA of $101 million, up 38 percent versus $73 million in first quarter 2013
- Adjusted EBITDA margin of 19 percent improves from 15 percent in first quarter 2013
- Mineral Sands segment revenue of $312 million and adjusted EBITDA of $129 million
- Pigment segment revenue of $304 million and adjusted EBITDA of ($26) million
- Pigment revenue up 6 percent versus first quarter 2013, driven by 7 percent volume increase to reach highest level since third quarter 2011; selling prices declined 1 percent
- Board declared regular quarterly dividend of $0.25 per share payable on September 4, 2013 to shareholders of record of company's Class A and Class B ordinary shares at close of business on August 19, 2013
In the report, Tom Casey, chairman and CEO of Tronox, said:
Our second quarter financial results reflect continued growth in pigment and zircon sales volumes, as well as the increasingly apparent benefits of our vertical integration. Our Pigment segment delivered its third consecutive quarter of sequential volume increase and second consecutive quarter of revenue increase while selling prices are showing signs of stabilizing. The average cost of feedstock in Pigment continued to decline relative to prior quarters and our finished pigment inventory is approaching near normal levels. In Mineral Sands, we saw our third consecutive quarter of robust sequential zircon volume and revenue gains while selling prices improved. Our vertical integration continues on plan with 80 percent of Mineral Sands' second quarter feedstock revenue derived from intercompany sales, up from 70 percent in the first quarter 2013.
All these factors -- the very low multiples, the very rich dividend, the fact that the stock is trading near its book value, and the fact that the stock is in an uptrend -- make TROX stock quite attractive.