Comprehensive screens and creating ranking systems are one of my favorite starting points for identifying potential investments. While I typically focus on Dividend Champions (stocks that have raised dividends for 25+ years) or high yield momentum stocks, this screen began with the entire universe of US stocks, excluding those that trade over-the-counter.
Using Stockscreen123, I required stocks to have:
- yield > 3%,
- payout ratio < 50%,
- dividend growth of at least 5% over the past 1, 3, and 5 years,
- dividend growth rate among the top 5% in the stock's respective industry
- Projected PE > 0 (in other words, the stock is expected to be profitable next year)
- Not over-the-counter
Republic Bancorp (RBCAA)
RBCAA is a regional bank currently yielding 3.32% with a very low payout ratio of 13%. It has been a relatively stable stock, even during the financial crisis of 2008, spending much of the past 6 years between $15-$25.
The company has a 22.63% return on equity, well above the industry average of 5.76, and a 5 year EPS growth rate of 17.24% versus the industry's 5.26%. The stock is most likely not going to make you rich on capital gains, but with a stable, growing dividend, it is a worthy candidate if you are seeking dividend exposure to the financial sector or regional bank industry:
(Monthly Chart courtesy of Finviz)
click to enlarge
Darden Restaurants (DRI)
While restaurants may not be the first industry that comes to mind when discussing high yield and high dividend growth, Darden has done a fantastic job of growing dividends over the past 5 years. The stock currently yields 3.36% with a payout ratio of 36.72%. Its 5 year dividend growth rate is over 26% and it has a one year dividend growth rate of 28%.
DRI has a return on equity of 25% (vs industry average of 10.54%) and a return on investment of 11.61% (vs industry average of 8.81%) and its 5 year ROE and ROI averages also trump the industry average. The stock was also recently featured in my Stocks to Watch list.
The company reported earnings in early July that please the market. However, the stock has sold off hard this week, along with many other names. The stock could struggle if there is a signficant slowdown in consumer spending in the coming months but its earnings have yet to reflect any slowdown:
click to enlarge
The entire 15 results are below. One could use additional criteria for ranking each such as creating your own ranking system using a spreadsheet (I provide detailed instructions on how to do so here). However, with just 15 names meeting the criteria it is a small enough universe to begin a focused stock selection process:
|TWGP||Tower Group, Inc.||949.86||3.26||14.71|
|PBR||Petroleo Brasileiro SA (ADR)||213461.3||3.63||31.7|
|ARLP||Alliance Resource Partners, L||2776.57||4.89||46.25|
|SSL||Sasol Limited (ADR)||33470.45||3.04||41.3|
|LMT||Lockheed Martin Corporation||26901.79||3.87||38.08|
|DRI||Darden Restaurants, Inc.||6901.73||3.36||36.83|
|CHL||China Mobile Ltd. (ADR)||200409.41||3.93||43.31|
|AZN||AstraZeneca plc (ADR)||67399.34||6.15||44.91|
|THG||The Hanover Insurance Group,||1646.73||3.04||34.13|
|ABV||Companhia de Bebidas das Amer||84548.38||4.81||47.34|
|RBCAA||Republic Bancorp, Inc. KY||385.26||3.35||13.16|
|FLIC||The First of Long Island Corp||232.59||3.31||38.83|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.