In a recent article we investigated high growth and high dividend stocks in emerging markets. The success of these stocks was primarily due to the tremendous growth in emerging markets over the last years. One might still wonder whether it's possible for a large cap US based company to continuously distribute dividends yet increase both revenues and profits. We think so.
We compiled a list of 10 US-based companies with tremendous growth rates that also pay fat dividend checks regularly. Most of these companies benefited from commodity price inflation over the last 5 years. Legendary investors George Soros and Jim Rogers are among the hedge fund managers who are extremely bearish about inflation and bullish about commodities. All companies in this list have a market capitalization above $1 billion, a P/E ratio smaller than 20, dividend yield of at least 3% and minimum EPS growth of 10% over the last five years.
Alliance Holdings GP, LP (AHGP): The AHGP is a producer and marketer of coal primarily to the United States. AHGP also owns 42.5% of interest in ARLP. Between 2005 and 2010, the company paid dividends at an average yield of 5.5%. Since then stock prices are up by 200%.
Alliance Resource Partners, LP (ARLP): ARLP Partnership is a producer and marketer of coal for domestic industrial use. More than 90% of its products are sold to electric utility plants. The current P/E ratio of 10.75 is among the lowest in its industry. The company has a regular dividend policy with an average of 7% in the last 5 years.
*Both ARLP and AHGP are very profitable companies, and they will greatly benefit from a rise in coal prices.
AmeriGas Partners, LP (APU): AmeriGas is a retail propane distributor that serves over 1.3 million customers in all 50 states. Thanks to its tremendous growth, the company was able to raise its quarterly dividends from $0.56 to $0.76 over the last 5 years.
AT&T Inc. (T): It is certain that AT&T will be facing tougher competition this year. AT&T’s annual EPS growth rate is 18%. Also, a P/E ratio of 8.5 and a current dividend yield of 6% are pretty attractive for yield seekers. Since 2005, AT&T’s revenues more than doubled and its operating margin reached almost 20%.
El Paso Pipeline Partners, LP (EPB): EPB is in the natural gas business. With an average annual EPS growth rate of 18% and a yield of 4.5%, EPB will also benefit from the rise in gas prices.
Flowers Foods, Inc. (FLO): Flowers is a fast growing producer and marketer of bakery products in the United States. Since 2005, Net Income and EPS grew at an average rate of 20%. The average dividend yield over the past five years was 3% and the stock price is up 40% since 2005.
Hudson City Bancorp, Inc. (HCBK): Hudson is a federally chartered savings bank in New York. Last year’s dividend yield was above 5%. The current P/E ratio of 10 is also among the lowest in its sector. Interestingly, HCBK is one of the 20 stocks Wall Street analysts expect to dive the most in 2011.
Kayne Anderson MLP Investment Co. (KYN): KYN offers another good opportunity to participate in the energy market. The trust invests in midstream energy companies. KYN has a very high dividend yield of 8%.
Strayer Education, Inc. (STRA): Strayer is among the largest for-profit education companies. Over the years, EPS, net income and revenues grew by 20%. Strayer currently pays $1 per share in quarterly dividends. Lone Pine Capital’s Stephen Mandel was extremely bullish about Strayer two years ago. Legendary short seller Jim Chanos was extremely bearish. The stock price was $170 back then. Today, it's $127. If you believe the worst is over for for-profit education companies, you can consider Strayer. Andreas Halvorsen’s Viking Global, Chase Coleman’s Tiger Global, and Lee Ainslie’s Maverick Capital have large positions in another for-profit education company: Apollo (APOL).
Sunoco Logistics Partners LP (SXL): Sunoco Logistics is involved in refined products pipeline systems, terminal facilities and crude oil pipeline systems. The stock price more than doubled from $40 in 2006 to $83 in 2010. Quarterly dividends also doubled from $0.62 in 2005 to $1.17 in 2010. The current P/E ratio of 9.14 is also below the industry average.
Disclosure: I am long T.