In a recent article, we introduced the discounted earnings model. According to this model, one of the best fair value estimation methods was to discount the future earnings for a 5-to-7 year period. However, there is one thing that we also need to consider: Fat dividend checks.
For many of us, living on dividends and/or having a lined-up cash-flow from dividends is essential. A strong retirement account requires solid and stable dividend income. Therefore, we analyzed the top yield U.S.-based companies that are engaged in basic materials, consumer goods, healthcare, services and technology sectors. The financial stocks are excluded from this analysis, since there is so much volatility regarding both their share prices and dividend payments.
The compiled list consists of 32 companies that paid fat dividend checks in 2010. Last year, these companies generated a dividend yield of at least 5%. They also have a minimum market cap of $300 million and a robust P/E ratio of maximum 20. Stock market data is retrieved from Finviz, Google Finance, Yahoo Finance and/or Zacks Investment Research. Here is the ultimate dividend list:
Stock | Sector | P/E | Yield | Beta | YTD Return |
Prudhoe Bay (BPT) | Basic M. | 13,47 | 7,57% | 0,65 | -6,50% |
El Paso Pipeline (EPB) | Basic M. | 18,72 | 5,00% | 0,28 | 6,54% |
Energy Partners (EVEP) | Basic M. | 13,7 | 6.33% | 1,04 | 24,29% |
Hugoton Royalty (HGT) | Basic M. | 14,73 | 6,52% | 0,76 | 12,35% |
MV Oil Trust (MVO) | Basic M. | 14 | 7.44% | 0,71 | -2,19% |
Pioneer Southwest (PSE) | Basic M. | 10 | 6.27% | N/A | 7,95% |
Spectra Energy (SEP) | Basic M. | 18,38 | 5.76% | 0,1 | -3,58% |
Sunoco Logistics (SXL) | Basic M. | 8,93 | 5.67% | 0,18 | 0,91% |
TC Pipelines (TCLP) | Basic M. | 17,38 | 5.93% | 0,54 | -1,31% |
Terra Nitrogen (TNH) | Basic M. | 13,23 | 6.01% | 0,71 | -0,82% |
Williams Partners (WPZ) | Basic M. | 19,02 | 5.58% | 1,17 | 9,64% |
Lorillard Inc (LO) | Consum. G. | 12,85 | 5.97% | 0,46 | 7,94% |
Altria Group (MO) | Consum. G. | 13,26 | 6.13% | 0,47 | 2,23% |
Pitney Bowes (PBI) | Consum. G. | 16,27 | 6.06% | 1,05 | 2,43% |
Reynolds American (RAI) | Consum. G. | 14,74 | 6.33% | 0,65 | 4,20% |
Bristol Myers (BMY) | Healthcare | 14,37 | 5.13% | 0,61 | -1,61% |
Eli Lilly & Co (LLY) | Healthcare | 7,51 | 5.68% | 0,77 | -0,23% |
PDL BioPharma (PDLI) | Healthcare | 10,86 | 10.83% | 0,78 | -8,73% |
Seacube (BOX) | Services | 8,9 | 5.68% | N/A | 10,10% |
Global Partners (GLP) | Services | 14,29 | 7.95% | 0,44 | -6,64% |
NutriSystem (NTRI) | Services | 11,89 | 5.16% | 0,79 | -34,68% |
R.R. Donnelley (RRD) | Services | 16,73 | 5.87% | 2 | 2,96% |
Star Gas Partners (SGU) | Services | 13,62 | 5.84% | 0,65 | 1,34% |
TAL International (TAL) | Services | 18,73 | 5.14% | 1,8 | 14,93% |
United Online (UNTD) | Services | 10,41 | 6.62% | 1,61 | -7,22% |
World Wrestling (WWE) | Services | 16,92 | 11.99% | 0,62 | -13,35% |
Consolidated Com.(CNSL) | Technology | 16,52 | 8.60% | 1,09 | -4,76% |
CenturyLink (CTL) | Technology | 13,36 | 6.93% | 0,74 | -7,88% |
NTELOS Holdings (NTLS) | Technology | 17,05 | 6.14% | 0,91 | -2,77% |
AT&T Inc (T) | Technology | 8,68 | 6.16% | 0,65 | -3,52% |
Windstream Cor.(WIN) | Technology | 19,59 | 7.73% | 0,9 | -7,25% |
Total / Average |
| 14,13 | 6.36 | 0.8 | -0.17 |
The average year-to-date performance of the companies listed above is -0.17%. While this might not look impressive, it provides a marvelous opportunity for contrarian investors. Technology companies suffered the most from recent sell-offs last week. One might want to consider these stocks when the prices are much lower than the peak value.
Energy Partners has the highest year-to-date performance of 24.29%. Last year, EVEP experienced an enormous EPS growth of 1245.72%. Next comes TAL International Group with a ytd performance of 14.93%, followed by Hugoton Royalty Trust at 12.35%. Momentum investors might want to consider these outperformers before they go higher.
Ntelos Holdings has the highest 5-Year EPS growth of 85.49% followed by Williams Partners with a 5-year growth rate of 35.26%. Sunoco Logistics ranks third in the list with a 5-year EPS growth rate of 31.78%. The average 5-year EPS growth rate of the companies is 9.00%.
All of the companies listed posted positive profit margins, and the average profit margin is 29.43%. BP Prudhoe Bay (99.28%), Energy Partners (61.83), Hugoton Royalty Trust (98.64%), MV Oil Trust (97.70%) and TC Pipelines (70.27%) posted profit margins higher than 60%.
The company with the highest beta in the list is United Online (1.61). Average beta of 0.8 suggests that the stocks listed above are immune to volatility. Therefore, they can generate both safe and high returns. Moreover, the average institutional ownership is 48.49%, which is another positive indicator.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
