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, Portfolio123 (2,494 clicks)
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I have searched for very profitable companies that pay very rich dividends and have raised their payouts at a very 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 5.20%.
  2. The payout ratio is less than 70%.
  3. The annual rate of dividend growth over the past three years is greater than 18%.
  4. The annual rate of dividend growth over the past five years is greater than 10%.
  5. Last dividend declared is greater than the last dividend paid.
  6. The PEG ratio is less than 1.05.
  7. Trailing P/E is less than 14.
  8. Forward P/E is less than 12.
  9. Average annual earnings growth estimates for the next five years is greater than 9%.

After running this screen on August 20, 2013, before the market open, I discovered the following three stocks:

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TAL International Group, Inc. (NYSE:TAL)

TAL International Group, Inc. engages in leasing intermodal containers and chassis worldwide.

TAL International has a very low trailing P/E of 9.77 and a very low forward P/E of 9.12. The PEG ratio is low at 0.98, and the average annual earnings growth estimates for the next five years is quite high at 10.0%. The forward annual dividend yield is very high at 6.54%, and the payout ratio is at 64%. The annual rate of dividend growth over the past three years was very high at 30.08% and over the past five years was also high at 10.30%.

On July 24, TAL International reported its second-quarter financial results, which was in-line on EPS and beat on revenues.

Second-Quarter Highlights

  • TAL reported Adjusted pre-tax income of $1.66 per fully diluted common share for the second quarter of 2013, an increase of 7.8% from the second quarter of 2012.
  • TAL reported leasing revenues of $139.5 million for the second quarter of 2013, an increase of 9.1% from the second quarter of 2012.
  • TAL continues to achieve outstanding operational performance. Utilization averaged 97.5% for the second quarter of 2013 and TAL has purchased over $470 million in new and sale-leaseback containers for delivery in 2013.
  • TAL announced a $0.02 increase in its quarterly dividend to $0.68 per share payable on September 24, 2013 to shareholders of record as of September 3, 2013.

TAL International has recorded strong revenue, EPS and dividend growth during the last year, the last three years and the last five years; the annual rate of revenue growth over the past five years was at 11.41%, the EPS growth was at 27.25, and the dividend growth was at 10.30%

Since TAL valuation metrics are very low, and the company growth prospects are good, a capital gain can be expected along the very rich dividend.

Risks to the expected capital gain and to the high dividend payment include; a downturn in the U.S. economy, decrease in the global trade, and the company's huge debt of $2.79 billion.

TAL Dividend Chart

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Chart: finviz.com

Textainer Group Holdings Limited (NYSE:TGH)

Textainer Group Holdings Limited, through its subsidiaries, engages in the purchase, ownership, management, leasing, and resale of a fleet of marine cargo containers worldwide.

Textainer Group Holdings has a very low trailing P/E of 8.94 and a very low forward P/E of 8.80. The PEG ratio is very low at 0.90, and the average annual earnings growth estimates for the next five years is quite high at 9.98%. The forward annual dividend yield is very high at 5.58%, and the payout ratio is at 50%. The annual rate of dividend growth over the past three years was very high at 23.53% and over the past five years was also high at 15.36%.

On August 06, Textainer Group Holdings reported its second-quarter results, which missed EPS expectations by $0.16 and missed on revenues.

Second-Quarter Highlights

  • Total revenues of $130.1 million, an increase of 8.4% from the prior year quarter
  • Net income attributable to Textainer Group Holdings Limited common shareholders of $48.8 million, an increase of 6.6% from the prior year quarter
  • Adjusted EBITDA of $106.2 million, an increase of 14.6% from the prior year quarter
  • Business Highlights:
  • Continued strong pace of expansion, investing $494 million in new and used containers year-to-date following $198 million invested in new containers in the fourth quarter of 2012 for lease outs in 2013;
  • Total fleet size grew by 9.4% to 2.9 million TEU, given the strong pace of investment over the past year;
  • Announced a collaboration with Trifleet allowing expansion into tank leasing with one of the leaders in the industry;
  • Reduced average effective interest rate (which includes interest rate swaps) by 145 basis points year-over-year and by 34 basis points compared to the prior quarter, while increasing the size of several financing facilities;
  • Achieved average utilization of 94.7% during the quarter and 94.3% currently; and
  • Increased dividend to $0.47 per share, resulting in the Company's fourteenth consecutive quarterly increase.

Textainer Group Holdings has recorded strong revenue, EPS and dividend growth during the last three years and the last five years; the annual rate of revenue growth over the past five years was at 12.83%, the EPS growth was at 18.99, and the dividend growth was at 15.36%

Although TGH missed second-quarter EPS and revenues expectations, its valuation metrics are very low, and the company growth prospects are good, a capital gain can be expected along the very rich dividend.

Risks to the expected capital gain and to the high dividend payment include; a downturn in the U.S. economy, decrease in the global trade, and the company's massive debt of $2.44 billion.

TGH Dividend Chart

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Chart: finviz.com

Lorillard, Inc. (NYSE:LO)

Lorillard, Inc. manufactures and sells cigarettes in the United States.

Lorillard has a low trailing P/E of 13.00 and a very low forward P/E of 11.91. The PEG ratio is quite low at 1.04, and the average annual earnings growth estimates for the next five years is quite high at 12.50%. The forward annual dividend yield is very high at 5.26%, and the payout ratio is at 68%. The annual rate of dividend growth over the past three years was very high at 18.12% and over the past five years was also high at 13.08%.

On July 25, Lorillard reported its second-quarter results, which beat EPS expectations by $0.01 and was in-line on revenues.

Second Quarter Highlights

  • Reported (GAAP) diluted earnings per share increased 15.3% versus last year to $0.83.
  • Adjusted (Non-GAAP) diluted earnings per share increased 11.0% versus last year to $0.81.
  • Net sales increased 4.2% over last year to $1.804 billion.
  • Adjusted (Non-GAAP) operating income increased 8.2% over last year to $529 million.
  • Total Lorillard retail market share of cigarettes increased 0.6 share points in the second quarter versus last year to 14.9% driven by Newport Menthol.
  • Lorillard received authorization from the FDA to market Newport Non-Menthol Gold.
  • blu eCigs achieved net sales of $57 million and over a 40% retail market share.
  • Lorillard issued $500 million in new notes and increased its share repurchase authorization to $1 billion.
  • Lorillard repurchased 3.9 million shares during the quarter at a cost of $169 million.

Lorillard has recorded strong revenue, EPS and dividend growth during the last year, the last three years and the last five years; the annual rate of revenue growth over the past five years was at 7.16%, the EPS growth was at 10.32, and the dividend growth was at 13.08%.

Since LO valuation metrics are very low, the company growth prospects are good, and the company is authorized to repurchase an additional $500 million of its outstanding common stock, a capital gain can be expected along the very rich dividend.

Risks to the expected capital gain and to the high dividend payment include; a menthol ban, acceleration of industry volume declines and a worsening of the litigation environment.

LO Dividend Chart

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Chart: finviz.com

Source: 3 High-Yielding Stocks That Have Raised Payouts By At Least 10% A Year For The Last 5 Years