I have searched for 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.
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:
- Price is greater than 2.00.
- Market cap is greater than $100 million.
- The forward dividend yield is greater than 4.20%.
- The payout ratio is less than 100%.
- Trailing P/E is less than 20.
- 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).
- The stock price is above the 200-day simple moving average (long-term uptrend).
After running this screen on August 29, 2013, before the market open, I discovered the following three stocks:
Equal Energy Ltd. (EQU)
Equal Energy Ltd. engages in the acquisition, exploration, development, and production of petroleum and natural gas properties in Canada.
Equal Energy has a very low debt (total debt to equity is only 0.27), and it has a very low trailing P/E of 6.73 and a low forward P/E of 14.36. The price-to-cash ratio is at 8.03, and the price to book value is quite low at 1.07. The forward annual dividend yield is high at 4.25%, and the payout ratio is only 29%.
The EQU stock price is 5.59% above its 20-day simple moving average, 11.50% above its 50-day simple moving average and 32.50% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On August 08, Equal Energy reported its second-quarter financial results. In the quarter, Equal generated cash flow before balance sheet changes of $5.9 million. At June 30, 2013, Equal had $20.4 million of cash on hand, compared to $21.5 million at March 31, 2013, and CAD $125 million or the USD equivalent available on its credit facility. As previously disclosed, the Board has declared a regular third quarter cash dividend of US$0.05 per share payable on September 25, 2013 to shareholders of record on September 2, 2013.
On August 20, Equal Energy announced that after careful consideration, its board of directors unanimously rejected the non-binding expression of interest received on August 14, 2013 from Montclair Energy, LLC. Among the many factors considered by the Board in concluding that the New Proposal is not in the best interests of Equal and its stakeholders is that the value of the New Proposal is lower than premiums typically paid in take-over offers and represents a premium of only 7% over the closing price on August 14, 2013, prior to the New Proposal being publicly announced and only 10% over the 20 day volume weighted average trading price ending on August 14, 2013.
In my opinion, EQU stock can move higher, since it has compelling valuation metrics and it is a take-over candidate. Furthermore, the rich dividend represents a nice income.
Since the company is rich in cash ($0.59 a share) and has a low debt and its payout ratio is low, there is a hardly risk that the company will reduce its dividend payment. Risks to the expected capital gain include a downturn in the U.S. economy, and new rules for gas horizontal drilling by the Department of Environmental Protection.
Great Northern Iron Ore Properties (GNI)
Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral properties on the Mesabi Iron Range in northeastern Minnesota.
Great Northern Iron Ore has no debt at all, and it has a very low trailing P/E of 7.04. The price-to-cash ratio is at 16.82, and the current ratio is at 2.90. The forward annual dividend yield is very high at 13.72%, and the payout ratio is at 97%. The annual rate of dividend growth over the past three years was very high at 20.51% and over the past five years was at 6.96%.
The GNI stock price is 5.77% above its 20-day simple moving average, 4.51% above its 50-day simple moving average and 6.24% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Great Northern Iron Ore has recorded strong revenue, EPS and dividend growth, during the last three years and the last five years, as shown in the table below.
Great Northern Iron Ore has recorded strong revenue, EPS and dividend growth, and considering its good valuation, GNI stock can move higher. Furthermore, the very rich dividend represents a gratifying income.
Risks to the GNI stock include; the cyclical nature of its business, the global commodity nature of iron ore, and the impact of global supply and demand on its selling prices.
An investor in GNI stock should bear in mind that the trust will terminate on April 6, 2015. At the end of the Trust on April 6, 2015, the certificates of beneficial interest (shares) in the Trust will cease to trade on the New York Stock Exchange and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the Trust.
Icahn Enterprises, L.P. (IEP)
Icahn Enterprises L.P. engages in the investment, automotive, gaming, railcar, food packaging, metals, real estate, and home fashion businesses in the United States and internationally.
Icahn Enterprises has a trailing P/E of 19.17 and a very low forward P/E of 10.82. The price-to-cash ratio is very low at 1.65, and the price-to-sales ratio is very low at 0.44. The forward annual dividend yield is very high at 6.69%, and the payout ratio is only 55%.
The IEP stock price is 0.63% above its 20-day simple moving average, 3.38% above its 50-day simple moving average and 19.51% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Icahn Enterprises has recorded strong revenue and EPS growth, during the last three years and the last five years, as shown in the table below.
On August 07, Icahn Enterprises reported its second-quarter financial results, which missed EPS expectations by $1.04. For the three months ended June 30, 2013, revenues were $4.6 billion and net income attributable to Icahn Enterprises of $54 million, or $0.48 per LP unit. For the three months ended June 30, 2012, revenues were $4.2 billion and net income attributable to Icahn Enterprises was $257 million, or $2.37 per LP unit. For the second quarter of 2013, Adjusted EBITDA attributable to Icahn Enterprises was $277 million compared to $506 million in the second quarter of 2012. For the second quarter of 2013, Adjusted EBIT attributable to Icahn Enterprises was $164 million compared to $401 million in the second quarter of 2012.
During the second quarter of 2013, the board of directors of the general partner of Icahn Enterprises L.P. approved a modification to Icahn Enterprises' distribution policy to provide for an increase in the annual distribution from $4.00 to $5.00 per depositary unit, payable in either cash or additional depositary units, at the election of each depositary unit holder. On August 6, 2013, the Board of Directors of the general partner of Icahn Enterprises declared a quarterly distribution in the amount of $1.25 per depositary unit, which will be paid on or about October 9, 2013 to depositary unit holders of record at the close of business on August 16, 2013.
Although IEP missed expectations in its latest quarter report, considering its historical strong revenue and EPS growth, and its good valuation, an investor in IEP stock can expect a capital gain 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 and a decline in the automotive and the real estate markets.