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Arie Goren, Portfolio123 (472 clicks)
Long only, value, research analyst, dividend investing
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In my previous post, I described the best S&P 500 dividend stocks according to ONeil principles. In this article I describe the best mid-cap dividend stocks which are included in the S&P MidCap 400 index, according to the same principles.

A Ranking system sorts stocks from best to worst based on a set of weighted factors. Portfolio123 has a powerful ranking system which allows the user to create complex formulas according to many different criteria. They also have highly useful several groups of pre-built ranking systems, I used one of them the "ONeil" in this article. The ranking system is based on investing principles of the well-known investor William O'Neil.

The "ONeil" ranking system is quite complex, and it is taking into account many factors like; EPS growth, sales growth, industry EPS growth, market conditions, company quality and stock stability, as shown in the Portfolio123's chart below.

In order to find out how such a ranking formula would have performed during the last 15 years, I ran a back-test, which is available by the Portfolio123's screener. For the back-test, I took all the 7,014 stocks in the Portfolio123's database.

The back-test results are shown in the chart below. For the back-test, I divided the 7,014 companies into fifty groups according to their ranking. The chart clearly shows that the average annual return has a very significant positive correlation to the "ONeil" rank. This brings me to the conclusion that the ranking system is useful.


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After running the "ONeil" ranking system on the companies which are included in the S&P MidCap 400 index and pay a dividend with a higher than 1% yield, on November 26, I discovered the twenty best dividend stocks, which are shown in the chart below. In this article, I describe the three best stocks. In my opinion, these stocks can reward an investor a significant capital gain along with a solid dividend. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Yahoo Finance, Portfolio123 and finviz.com.


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Waddell & Reed Financial, Inc. (WDR)

Waddell & Reed Financial, Inc. provides investment management, investment product underwriting and distribution, and shareholder services administration to mutual funds, and institutional and separately managed accounts in the United States.


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Source: company presentation

Waddell & Reed Financial has a trailing P/E of 24.11 and a forward P/E of 18.32. The PEG ratio is at 1.35, and the average annual earnings growth estimates for the next five years is very high at 17.80%. The forward annual dividend yield is at 1.75%, and the payout ratio is only 30.5%. The annual rate of dividend growth over the past three years was high at 12.74% and over the past five years was also high at 8.65%.

The WDR stock price is 0.47% above its 20-day simple moving average, 10.45% above its 50-day simple moving average and 32.45% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

Waddell & Reed Financial has recorded strong revenue, EPS and dividend growth, during the last year, the last three years and the last five years, as shown in the charts below.


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Source: company presentation

The tables below emphasize the Waddell & Reed's superior growth rates and return on capital over the industry median, the sector median and the S&P 500 median.


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Source: Portfolio123

On October 29, Waddell & Reed Financial reported its third-quarter financial results, which beat EPS expectations by $0.07 and beat on revenues. The company reported net income of $68.4 million, or $0.80 per diluted share, compared to net income of $52.0 million, or $0.61 per diluted share during the previous quarter and net income from continuing operations of $52.1 million, or $0.61 per diluted share during the third quarter of 2012.

Waddell & Reed Financial has recorded strong revenue, EPS and dividend growth, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, WDR stock can move higher. Furthermore, the solid growing dividend represents a nice income.

WDR Dividend Chart


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Chart: finviz.com

SEI Investments Co. (SEIC)

SEI Investments Co. is a publicly owned investment manager.


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Source: company presentation

SEI Investments has a trailing P/E of 21.31 and a forward P/E of 20.26. The current ratio is very high at 5.50, and the average annual earnings growth estimates for the next five years is quite high at 12%. The forward annual dividend yield is at 1.18%, and the payout ratio is only 42%.

The SEIC stock price is 0.81% above its 20-day simple moving average, 4.90% above its 50-day simple moving average and 12.41% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

SEI Investments has recorded strong revenue, EPS and dividend growth during the last year, as shown in the table below.

Most SEI Investments' margins, return on capital and financial strength parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the tables below.


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On October 24, SEI Investments reported its third-quarter financial results, which beat EPS expectations by $0.04 and was in-line on revenues. The company reported diluted earnings per share of $0.38 in third-quarter 2013 compared to $0.29 in third-quarter 2012.

In the report, Alfred P. West, Jr., SEI Chairman and CEO said:

During the third quarter of 2013, the Company continued its positive progress across all of our business units. Our growth in revenues and profits reflect the impact of new client activity, growth of existing clients, and positive asset flows. We continue to be encouraged by the market acceptance of our solutions. We are engaged in rapidly-changing markets requiring continued investment in our product and service offering. This enables us to enhance our competitive strength, accelerate our growth, and enhance long-term shareholder value.

SEI Investments has recorded revenue, EPS and dividend growth, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, SEIC stock can move higher. Furthermore, the solid growing dividend represents a nice income.

SEIC Dividend Chart


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Chart: finviz.com

Packaging Corporation of America (PKG)

Packaging Corporation of America engages in the manufacture and sale of containerboard and corrugated packaging products for industrial and consumer markets in the United States.


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Source: company presentation

Packaging Corporation has a trailing P/E of 22.00 and a low forward P/E of 14.15. The current ratio is high at 3.20, and the average annual earnings growth estimates for the next five years is very high at 15%. The forward annual dividend yield is at 2.63%, and the payout ratio is only 45.5%. The annual rate of dividend growth over the past three years was very high at 31.51% and over the past five years was at 2.58%.

The PKG stock price is 1.71% above its 50-day simple moving average and 19.94% above its 200-day simple moving average. That indicates a mid-term and a long-term uptrend.

Packaging Corporation has recorded strong revenue, EPS and dividend growth during the last year, as shown in the table below.

Most Packaging Corporation's margins, efficiency and return on capital parameters have been better than its industry median and its sector median, as shown in the tables below.


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On October 14, Packaging Corporation reported its third-quarter financial results, which beat EPS expectations by $0.02 and beat on revenues. The company reported net income of $84 million, or $0.86 per share, which included an after tax charge of $3 million, or $0.03 per share, for costs related to the announced Boise Inc. acquisition agreement and a non-cash charge of $2 million after tax, or $0.02 per share, for changes to PCA's mill employee pension plan. Excluding special items, net income was a record $89 million, or $0.91 per share, compared to third quarter 2012 net income of $53 million, or $0.55 per share, which excludes debt refinancing charges. Net sales were a record $845 million, up 17% from third quarter 2012 of $723 million.

On October 25, Packaging Corporation announced the completion of its acquisition of Boise Inc. (BZ). After the previously announced completion of the tender offer for all of the outstanding shares of Boise, PCA completed the second step merger under Delaware law, making Boise a wholly-owned subsidiary of PCA.

Packaging Corporation has recorded revenue, EPS and dividend growth, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, PKG stock can move higher. Furthermore, the rich growing dividend represents a nice income.

PKG Dividend Chart
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Chart: finviz.com

Source: Best Mid-Cap Dividend Stocks According To ONeil Principles