I have searched for profitable stocks that pay rich dividends with a low payout ratio. Those stocks would also have to show considerable earnings growth during the past five years and strong earnings growth prospects.
I introduced in the finviz.com Screener the following demands:
- Dividend Yield - Over 3%
- Payout Ratio - Under 90%
- EPS growth Past 5 years - Over 10%
- EPS growth next 5 years - Over 10%
- Forward P/E - Under 20
As a result, only 19 stocks came out, then I looked at the tables of stock valuation group comparison at Portfolio123, and I found three stocks with much better projected P/E estimates for the current year and for the next year than that of the industry median, the sector median and the S&P 500 median.
In this article, I describe these three 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, finviz.com and Yahoo Finance, on October 12, 2013.
Cinemark Holdings Inc. (CNK)
Cinemark Holdings, Inc. engages in motion picture exhibition business. The company operates in the United States, Brazil, Mexico, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, and Guatemala.
Source: company presentation
Cinemark Holdings has a trailing P/E of 28.91 and a forward P/E of 15.17. The average annual earnings growth for the past five years was quite high at 11.60%, and the average annual earnings growth estimates for the next five years is high at 15%. The forward annual dividend yield is at 3.12%, and the payout ratio is at 75.7%. The annual rate of dividend growth over the past three years was at 5.27%, and over the past five years was very high at 22.08%.
The CNK stock price is 1.75% above its 20-day simple moving average, 4.16% above its 50-day simple moving average and 11.19% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Cinemark Holdings has recorded strong revenue, EPS and dividend growth, during the last three years, and the last five years, as shown in the charts below.
Source: company presentation
The tables below show Cinemark Holdings' growth rates and stock valuation in comparison to the industry median, the sector median and the S&P 500 median.
Cinemark Holdings will report its latest quarterly financial results on November 07. CNK is expected to post a profit of $0.54 a share, a 32% rise from the company's actual earnings for the same quarter a year ago.
Cinemark has recorded revenue, EPS and dividend growth, and it has strong earnings growth prospects, and considering the fact that the stock is in an uptrend, CNK stock still has room to go up.
CA Inc. (CA)
CA, together with its subsidiaries, provides enterprise information technology management software and solutions that help customers manage and secure IT environments in the United States and internationally.
CA has a very low debt (total debt to equity is only 0.23), and it has a very low trailing P/E of 12.83 and a very low forward P/E of 11.61. The price to free cash flow for the trailing 12 months is at 22.79, and the average annual earnings growth estimates for the next five years is quite high at 12.50%. The forward annual dividend yield is quite high at 3.39%, and the payout ratio is only 43%. The annual rate of dividend growth over the past three years was very high at 84.20% and over five years was also very high at 44.27%.
CA has recorded strong EPS and dividend growth, and moderate revenue growth, during the last year, the last three years and the last five years, as shown in the table below.
The tables below emphasize CA's superiority in terms of margins, return on capital and valuation over its industry median, its sector median and the S&P 500 median.
CA will report its latest quarterly financial results on October 21. CA is expected to post a profit of $0.73 a share, a 24% rise from the company's actual earnings for the same quarter a year ago.
On July 24, CA reported its first-quarter fiscal year 2014 results, which beat EPS expectations by $0.04 and beat on revenues.
- GAAP EPS Grows 47 Percent in Constant Currency and 43 Percent as Reported
- Non-GAAP EPS Grows 25 Percent in Constant Currency and 24 Percent as Reported
- Revenue Decreases 1 Percent in Constant Currency and as Reported
- Cash Flow From Operations Decreases 83 Percent in Constant Currency and 94 Percent as Reported
- Reaffirms FY 2014 Outlook
In the report, CA Technologies Chief Executive Officer Mike Gregoire said:
I am pleased with our performance in the first quarter and the start we made to fiscal year 2014. We did better than expected on the revenue line and were able to capitalize on organizational efficiencies, expense management and a tax benefit to drive earnings growth. Our cash flow from operations was down, but that was expected and we are confident in meeting our full year outlook in all areas.
CA has recorded revenue, EPS and dividend growth, and considering its compelling valuation metrics, and its good earnings growth prospects, CA stock can move higher. Furthermore, the rich dividend represents a nice income.
The Blackstone Group L.P. (BX)
The Blackstone Group L.P., together with its subsidiaries, provides alternative asset management and financial advisory services worldwide.
The Blackstone Group has a trailing P/E of 24.83 and a very low forward P/E of 9.26. The PEG ratio is very low at 0.70, and the average annual earnings growth estimates for the next five years is very high at 16%. The forward annual dividend yield is quite high at 3.46%, and the payout ratio is at 85%.
The BX stock price is 6.96% above its 20-day simple moving average, 13.91% above its 50-day simple moving average and 28.78% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Analysts recommend the stock. Among the 14 analysts covering the stock, four rate it as a strong buy, nine rate it as a buy, and only one rates it as a hold.
The Blackstone Group has recorded strong EPS and revenue growth, and negative dividend growth, during the last year and the last three years, as shown in the table below.
The tables below show The Blackstone Group's growth rates and stock valuation in comparison to the industry median, the sector median and the S&P 500 median.
The Blackstone Group will report its latest quarterly financial results on October 17. The Blackstone Group is expected to post a profit of $0.58 a share, a 5.5% rise from the company's actual earnings for the same quarter a year ago.
On July 18, Blackstone reported its second quarter results, which beat EPS expectations by $0.13 and beat on revenues.
Blackstone's Second Quarter 2013 Highlights
- Economic Net Income more than tripled to $703 million for the quarter, or $0.62 per unit, up from $212 million, or $0.19 per unit in last year's second quarter.
- Results were driven by strong fund performance, which led to an over five-fold increase in Total Performance Fees.
- Distributable Earnings increased 73% year-over-year to $338 million, or $0.28 per common unit, compared with $195 million, or $0.17 per common unit, in the year ago quarter.
- Fund activity generated $258 million of Realized Performance Fees, up almost four times from $68 million in second quarter 2012, bringing the year-to-date amount to $577 million, up almost seven times from $86 million in the comparable period last year.
- GAAP Net Income was $211 million for the quarter, net of certain non-cash IPO and transaction related expenses and exclusive of net income attributable to non-controlling interests, mainly inside ownership.
- Total AUM reached a record $230 billion, up 21% year-over-year with double-digit increases across all investment businesses, through a combination of strong inflows and carrying value appreciation.
- Gross inflows totaled $14 billion in the second quarter and $42 billion over the last twelve months, including $40 billion, or 94%, from purely organic growth into new funds, products and strategies.
- Blackstone's funds returned $28 billion of capital to investors over the last twelve months.
- Blackstone declared a second quarter distribution of $0.23 per common unit payable on August 5, 2013, bringing the year-to-date distribution to $0.53 per common unit.
- The definition of DE has been modified to exclude equity-based compensation expense, which will result in an increase to both DE and distributions beginning this quarter.
- Announced agreement to acquire Strategic Partners, the secondary alternatives business of Credit Suisse, with $10 billion of AUM, which is expected to close in the third quarter.
Considering BX's very good valuation, and its strong earnings growth prospects, capital gains can be expected, in addition, to the rich dividend.
Risks to the expected capital gain and to the high dividend payment include; a downturn in the U.S. economy, and the company's massive debt of $11.38 billion.