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I have searched for profitable companies that pay rich dividends with low payout ratio, and have raised their payouts at a high rate for the last year, the last three years, and the last five years. Those stocks would also have to show low debt.

I used the Portfolio123's powerful screener to perform the search. The screen's formula requires all stocks to comply with all following demands:

  1. The stock does not trade over-the-counter (OTC).
  2. Price is greater than 1.00.
  3. Market cap is greater than $100 million.
  4. Dividend yield is greater than 4.0%.
  5. The payout ratio is less than 100%.
  6. Total debt to equity is less than 1.0.
  7. The annual rate of dividend growth over the past year is greater than 5%.
  8. The annual rate of dividend growth over the past three years is greater than 5%.
  9. The annual rate of dividend growth over the past five years is greater than 5%.

As shown in the chart below, 14 stocks came out, as a result, (the number of stocks left after each demand can be seen in the chart). In this article, I describe three of these stocks which in my opinion can reward an investor a capital gain along a very rich dividend. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Portfolio123 and finviz.com, on September 22, 2013.

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Compañía de Minas Buenaventura (NYSE:BVN)

Compañía de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining, and processing of gold and silver in Peru. Compañía de Minas Buenaventura S.A.A. was founded in 1953 and is headquartered in Lima, Peru.

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Source: company presentation

Compañía de Minas Buenaventura has a very low debt (total debt to equity is only 0.06), and it has a very low trailing P/E of 6.59 and very low forward P/E of 7.41. The PEG ratio is low at 1.00, and the average annual earnings growth estimates for the next five years is at 6.6%. The price-to-book-value ratio is very low at 0.79. The forward annual dividend yield is quite high at 4.13%, and the payout ratio is only 28%. The annual rate of dividend growth for the last year was at 7.14%, for the last three years was very high at 55.36%, and over the past five years was also high at 16.89%.

Compañía de Minas Buenaventura has recorded strong revenue, EPS and dividend growth, during the last five years, as shown in the table below.

Source: Portfolio123

On July 30, Compañía de Minas Buenaventura reported its second-quarter financial results. EPS came in at $0.07, a $0.11 below expectations.

In the report, the company explained its new dividend policy:

As part of the cash control strategy, the Board of Directors proposed the modification of the dividend policy. The new policy is: Buenaventura will distribute an annual cash dividend of at least 20% of net income generated by majority-owned operations and subsidiaries. In the case of Buenaventura's Associates 20% of their net income will be included if they distribute cash dividends to Buenaventura.

The chart below, which was taken from the company presentation, shows the company's cash cost of mining gold, silver, zinc and copper.

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Compañía de Minas Buenaventura has recorded strong revenue, EPS and dividend growth, and considering its cheap valuation metrics, and the fact that the stock is trading way below book value, BVN stock can move much higher once the gold bull market resumes. Furthermore, the rich dividend represents a nice income.

Risks to the expected capital gain and to the dividend payment include a further decline in the price of gold, and a change in the Peruvian government mines' policy.

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Chart: finviz.com

Safety Insurance Group Inc. (NASDAQ:SAFT)

Safety Insurance Group, Inc. provides private passenger automobile insurance products primarily in Massachusetts, and New Hampshire.

Safety Insurance Group has no debt at all, and it has a low trailing P/E of 14.72 and a forward P/E of 16.00. The PEG ratio is very low at 0.98, and the price-to-book value is at 1.20. The price to free cash flow for the trailing 12 months is very low at 14.41, and the average annual earnings growth estimates for the next five years is very high at 15%. The forward annual dividend yield is quite high at 4.48%, and the payout ratio is at 66%. The annual rate of dividend growth for the last year was at 10.00%, for the last three years was at 11.20%, and over the past five years was at 11.10%.

SAFT's stock price is 4.92% above its 20-day simple moving average, 2.15% above its 50-day simple moving average and 8.97% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

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

Source: Portfolio123

On August 7, Safety Insurance Group reported its second-quarter financial results, which beat EPS expectations by $0.36. Net income for the quarter ended June 30, 2013 was $18.0 million, or $1.17 per diluted share, compared to net income of $17.0 million, or $1.11 per diluted share, for the comparable 2012 period. Net income for the six months ended June 30, 2013, was $32.0 million, or $2.08 per diluted share, compared to $34.2 million, or $2.24 per diluted share, for the comparable 2012 period.

Safety paid $0.60 per share in dividends to investors during the quarter ended June 30, 2013, compared to $0.50 per share during the comparable 2012 period. Safety paid $2.20 per share in dividends to investors during the year ended December 31, 2012.

Safety Insurance Group has compelling valuation metrics and strong earnings growth prospects, and considering its latest quarter strong results, SAFT stock can move higher. Furthermore, the rich dividend represents a nice income.

Risks to the expected capital gain include a downturn in the U.S. economy, and a decline in the U.S. auto market.

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Chart: finviz.com

Main Street Capital Corp (NYSE:MAIN)

Main Street Capital Corporation is a business development company specializing in equity, equity related, and debt investments in small and lower middle market companies.

Main Street Capital has a very low trailing P/E of 9.48 and a low forward P/E of 13.44. The average annual earnings growth estimates for the next five years is at 7.0%. The forward annual dividend yield is very high at 6.45%, and the payout ratio is at 59%. The annual rate of dividend growth for the last year was at 10.38%, for the last three years was at 5.37%, and over the past five years was at 9.22%.

The MAIN stock price is 1.27% above its 20-day simple moving average, 0.28% above its 50-day simple moving average and 1.43% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Main Street Capital has recorded strong revenue and EPS growth, during the last three years and the last five years, as shown in the table below.

Source: Portfolio123

On August 8, Main Street Capital reported its second-quarter financial results, which beat EPS expectations by $0.05.

Second-Quarter 2013 Highlights

  • Total investment income of $27.8 million, representing a 33% increase from the second quarter of 2012
  • Net investment income of $17.8 million (or $0.51 per share), representing a 39% increase from the second quarter of 2012
  • Distributable net investment income of $18.4 million (or $0.53 per share), representing a 38% increase from the second quarter of 2012
  • Net Asset Value of $18.72 per share at June 30, 2013, which represents an increase of $0.48 per share, or 3%, after excluding the effect of the $0.35 per share special dividend paid in January 2013, compared to $18.59 per share at December 31, 2012
  • Paid regular monthly dividends of $0.465 per share, or $0.155 per share for each of April, May and June 2013, representing an 11% increase compared to the second quarter of 2012 regular monthly dividends
  • Declared regular monthly dividends of $0.465 per share, or $0.155 per share for each of July, August and September 2013, representing a 7% increase compared to the third quarter of 2012
  • Declared semi-annual supplemental cash dividend of $0.20 per share payable in July 2013

Main Street Capital Corporation 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 48.64%, the EPS growth was at 63.73, and the dividend growth was at 9.22%

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

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Chart: finviz.com

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