If you are considering sources of dividend income, there are several important considerations to keep in mind. The company’s payout ratio (dividend per share/earnings per share) should be sustainably low, while cash flow should be healthy enough to continue paying the dividend. The dividend yield should be sustainably low as well.
We ran a screen on dividend stocks for those that have seen rising dividends per share while also seeing decreases in the payout ratio. Only dividend yields below 7% and payout ratios below 35% were included.
We also screened for increases in operating cash flow/revenue, comparing the trailing-twelve-month ratio to the three-year average. Finally, we screened for those stocks that have also been seeing significant net institutional buying over the current quarter.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Do you think these stocks pay reliable dividends? Use this list as a starting point for your own analysis.
List sorted by net institutional purchases as a percent of share float.
1. Packaging Corp. of America (PKG): Packaging and Containers Industry. Market cap of $2.82B. Dividend yield at 2.91%. TTM payout ratio at 29.81% vs. three-year average at 43.65%. Current year dividend per share estimate at $0.78 vs. most recent year dividend per share at $0.60. TTM operating cash flow/revenue at 0.16 vs. three-year average at 0.15. Net institutional purchases over the current quarter at 1.1M, which is 1.12% of the company's 98.41M share float. The stock has gained 24.97% over the last year.
2. First Commonwealth Financial Corp. (FCF): Regional Banks Industry. Market cap of $567.56M. Dividend yield at 2.20%. TTM payout ratio at 14.25% vs. three-year average at 174.79%. Current year dividend per share estimate at $0.12 vs. most recent year dividend per share at $0.06. TTM operating cash flow/revenue at 0.40 vs. three-year average at 0.39. Net institutional purchases over the current quarter at 502.4K, which is 0.50% of the company's 100.83M share float. The stock is a short squeeze candidate, with a short float at 6.49% (equivalent to 13.45 days of average volume). It has been a rough couple of days for the stock, losing 5.58% over the last week.
3. U.S. Bancorp (USB): Regional Banks Industry. Market cap of $47.67B. Dividend yield at 2.03%. TTM payout ratio at 14.23% vs. three-year average at 50.96%. Current year dividend per share estimate at $0.48 vs. most recent year dividend per share at $0.20. TTM operating cash flow/revenue at 0.47 vs. three-year average at 0.46. Net institutional purchases over the current quarter at 6.2M, which is 0.32% of the company's 1.92B share float. The stock has gained 8.89% over the last year.
*Dividend and operating cash flow/revenue data sourced from Screener.co, institutional data sourced from Fidelity, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
