I have searched for very profitable companies that are included in the Russell 2000 index that pay rich dividends and that have raised their dividends. Those stocks would also have to show a very low payout ratio.
I used the Portfolio123's powerful screener to perform the search. The screen's formula requires all stocks to comply with all following demands:
- The stock does not trade over-the-counter (OTC).
- Price is greater than 1.00.
- Market cap is greater than $100 million.
- Dividend yield is greater than 2.0%.
- The payout ratio is less than 100%.
- The annual rate of dividend growth over the past year is greater than 10%.
- Last dividend declared is greater than the previous one.
As shown in the chart below, 24 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 with a 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 25, 2013, before the market open.
Symetra Financial Corporation (NYSE:SYA)
Symetra Financial Corporation, through its subsidiaries, provides group and life insurance products and retirement products in the United States and the District of Columbia.
Symetra Financial Corporation has a very low debt (total debt to equity is only 0.15), and it has a very low trailing P/E of 12.28 and a very low forward P/E of 10.64. The price-to-sales ratio is at 1.11, and the price-to-book value is very low at 0.77. The price to free cash flow for the trailing 12 months is extremely low at 2.25, and the average annual earnings growth estimates for the next five years is at 8.60%. The forward annual dividend yield is at 2.04%, and the payout ratio is only 21%. The annual rate of dividend growth over the past year was very high at 21.74%.
Symetra Financial Corporation has recorded revenue and EPS growth, during the last three years, as shown in the table below.
On July 24, Symetra reported its second-quarter financial results, which beat EPS expectations by $0.06 and was in-line on revenues.
Second-Quarter 2013 Highlights
- Adjusted operating income was $51.4 million, or $0.39 per diluted share, up from $47.2 million, or $0.34 per diluted share, in second quarter 2012.
- Net income was $45.0 million, or $0.34 per diluted share, compared with net income of $43.8 million, or $0.32 per diluted share, in second quarter 2012.
- Benefits operating income was flat compared with year-ago results. The loss ratio was 66.2% versus 65.5% in second quarter 2012, though improved from 68.5% in first quarter 2013.
- Deferred Annuities earnings increased on higher investment income from prepayment-related activity and lower operating expenses. Fixed indexed annuity sales grew significantly over second quarter 2012 and first quarter 2013 levels.
- Income Annuities operating income fell due to lower mortality gains and a lower interest margin.
- Individual Life earnings rose as a result of fewer claims and lower operating expenses.
- Shares outstanding, including warrants, were reduced by 20.3 million.
- Symetra revised its earlier earnings guidance to expected adjusted operating income per diluted share of $1.45-$1.55 for full-year 2013.
- Stock repurchases during second quarter 2013 totaled 6.6 million common shares at an average price per share of $13.43 and a cost of $89.2 million.
Symetra has compelling valuation metrics and good earnings growth prospects, and considering its latest quarter strong results, and the fact that the stock is trading way below book value. SYA stock still has room to go higher. Furthermore, the rich dividend represents a nice income.
Risks to the expected capital gain include a downturn in the U.S. economy, further changes in the interest rate environment, and a higher Loss ratio from its current 66.2%.
Brinker International, Inc. (NYSE:EAT)
Brinker International, Inc. owns, develops, operates, and franchises full-service casual dining restaurants under the Chili's Grill & Bar and Maggiano's Little Italy brands primarily in the United States.
Brinker International has a trailing P/E of 18.23 and a very low forward P/E of 12.78. The PEG ratio is at 1.16, and the average annual earnings growth estimates for the next five years is very high at 15.70%. The forward annual dividend yield is at 2.37%, and the payout ratio is only 34.5%. The annual rate of dividend growth over the last year was very high at 25%, over the past three years was also very high at 19.40%, and over the past five years was high at 13.75%.
Brinker International has recorded strong EPS and dividend growth, during the last year, the last three years and the last five years, as shown in the charts below.
Source: company presentation
Brinker International will report its latest quarterly financial results on October 23. EAT is expected to post a profit of $0.46 a share, a $0.09 rise from the company's actual earnings for the same quarter a year ago.
Brinker International has recorded strong EPS and dividend growth, and it has strong earnings growth prospects. In my opinion, EAT stock can move higher. Furthermore, the rich dividend represents a nice income.
Risks to the expected capital gain includes a downturn in the U.S. economy, and the company debt of $808 million.
IdaCorp, Inc. (NYSE:IDA)
IDACORP, Inc., through its subsidiary, Idaho Power Company, engages in the generation, transmission, distribution, sale, and purchase of electric energy in the United States.
IdaCorp has a low trailing P/E of 13.04 and a low forward P/E of 14.31. The price-to-book value is at 1.36, and the average annual earnings growth estimates for the next five years is at 4%. The forward annual dividend yield is quite high at 3.52%, and the payout ratio is only 39%. The annual rate of dividend growth over the last year was high at 14.17%, over the past three years was at 4.52%, and over the past five years was at 2.69%.
IdaCorp has recorded revenue, EPS and dividend growth, during the last year, the last three years and the last five years, as shown in the charts below.
Source: company presentation
On August 1, IdaCorp reported its second-quarter results, which beat EPS expectations by $0.23, and beat on revenues, and increased its 2013 earnings guidance. The company reported second-quarter 2013 net income attributable to IDACORP of $45.5 million, or $0.91 per diluted share, compared to $35.3 million, or $0.71 per diluted share, in the second quarter of 2012. For the first six months of 2013, IDACORP recorded net income attributable to IDACORP of $79.0 million, or $1.58 per diluted share, compared with $60.2 million, or $1.21 per diluted share for the first six months of 2012.
In the report the company increased its 2013 earnings guidance:
Based on these results and our outlook for the remainder of 2013, we are increasing our annual earnings per share guidance from the range of $3.20 to $3.35 per diluted share to the range of $3.40 to $3.55 per diluted share. The guidance assumes sharing a portion of earnings with our Idaho customers, as we currently anticipate exceeding the ten percent return on year-end equity threshold for 2013.
IdaCorp has recorded revenue, EPS and dividend growth, and considering its latest quarter strong results, and the fact that the company increased its 2013 earnings guidance, IDA 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 the company debt of $1.75 billion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.