By Jake Mann
In search of dividend stocks, there are many ways to parse down the data. Searching for high yielders with rock bottom payout ratios is one way to find promising dividend growth stocks. We can also find interesting investing ideas by selecting long-term dividend stocks-those that have raised dividends in 50 or more consecutive years-with multiple insiders buying over the past six months.
Security and services company Diebold (DBD) is simply a dividend beast. It has raised dividends in 60 consecutive years and currently offers a yield of 3.8%. Over the past three months, two insiders, CEO Andreas Mattes and VP John Kristoff, have bought Diebold stock. Mattes currently owns about $824K worth of the stock while Kristoff's position is a bit smaller, and in the entire year of 2013, Board members Rajesh Soin and Henry Wallace have also initiated purchases here.
With four unique executives buying in the calendar year and two of these taking place very recently, Diebold is in an attractive spot. Multiple empirical studies show that insider activity like this is the best for piggyback investors to pay attention to (learn how some insider trades beat the market).
Since Mattes' most recent buy in late August, shares of Diebold are up 6%, above the Dow and S&P by a little over two percentage points. Shares aren't overly expensive at current levels and sell-side analysts expect earnings to grow by more than 40% next year. So, if you're not already collecting Diebold dividend checks, you've got one more quarter to get in before the company likely makes it 61 consecutive years of dividend hikes.
American States Water
American States Water (AWR), meanwhile, is another dividend giant that has seen bullish insider activity of late. The Western US-focused water utilities company has raised dividends in 59 straight years and currently offers a yield of 2.9%. Somewhat astoundingly, American's payout ratio (47%) is still below its industry's average (59%), so the dividend growth doesn't look set to end anytime soon.
In 2013, investors have been appreciating American States Water's stock to the tune of a 13.4% gain year-to-date, as many pundits expect a higher level of water infrastructure spending to provide a nice tailwind behind the company's bottom line. Like Diebold, Wall Street expects American States Water to experience solid earnings growth of over 25% this year, and a whopping four company directors have bought stock in the last six months.
The full list of these transactions is here, but it's worth noting that since James McNulty's buy in early September, shares have risen 8.3%. In other words, American States Water has beaten the Dow by six percentage points in a little over a month. These insiders have to be very happy with their purchases.
Cincinnati Financial (CINF), lastly, is an under-covered insurance company that has grown dividends in 53 straight years. The stock pays a yield of 3.5% at a modest payout of 47% of earnings, and in 2013, it has appreciated by more than 20%. Three Cincinnati Financial insiders-one director, a senior VP and the company's CFO-have bought shares in the past six months. CFO Michael Sewell initiated the biggest transaction of the bunch when he bought $147K worth of the stock in the last few days of July.
Going forward, Cincinnati Financial's valuation looks neither cheap nor expensive, while cash flow and earnings growth should lead to another year of dividend growth in 2014. In its first two quarters of 2013, the insurer has beaten analysts' EPS expectations by an average margin of 30%, driven by solid premium growth and diminished catastrophe losses.
In addition to the recent string of insider purchases, a ton of elite hedge fund managers (see the full list here) were buying Cincinnati Financial in the latest round of 13F filings, including Glen Russell Dubin, Paul Tudor Jones, Murray Stahl, Steve Cohen and Ken Griffin. There's a lot of support from all facets of the "smart money" here.