Lesser Known, Quality Dividend Payers

Investors looking for a safe haven while assessing the damage from Tuesday’s sell-off can look to solid dividend stocks, whose fat yields should both reward shareholders and help make them more resistant to rapid declines. The companies highlighted tend to be boring and highly profitable. Here are a few lesser-known ones that look good, sorted by yield:

Alliance Resource (ARLP) – an Appalachian coal miner, Alliance has been aggressively expanding its operations. ARLP looks to be trading at a discount to fair value, and I believe the company will benefit from good long-term fundamentals on coal. It offers a 6.1% yield to help investors wait.

ARLP 1-yr chart

United Online (UNTD) – focuses on the “value” segment of internet access; in the process of transitioning business models but strong operating cash flow and a balance sheet flush with cash offers a cushion against any troubles and allows it to pay a 5.8% dividend.

UNTD 1-yr chart

Commonwealth Telephone (CTCO) – a telecom that provides services to rural Pennsylvania, CTCO has manageable debt, relatively steady cash flow, and a 4.6% yield.

CTCO 1-yr chart

U.S. Smokeless Tobacco (UST) – I’m not a socially responsible investor, so when I see a company selling a highly addictive product that hooks extremely young people, I become interested. UST is an enormously profitable company with tremendous pricing power that pays a 4% dividend.

UST 1-yr chart

Advance America, Cash Advance Centers (AEA) – a high level of distaste for payday lenders has sent the stock down almost 10% in the last 6 months. The company generates substantial cash flow, has little debt, and a 3.6% yield.

AEA 1-yr chart

Coupling stocks like these with perennial dividend payers like Kimberly-Clark (KMB) (3.1% yield) or Altria (MO) (4.0% yield) would produce a fairly conservative portfolio that gives substantial dividend income. Perhaps more importantly with the current economic uncertainties, these companies don’t just offer dividends; they are well-run businesses that generate high returns on assets and strong profit margins. Readers, if you have any other good dividend paying stocks on your radar, I’d like to know – leave a comment below.

Disclosure: Author has no position in any of the above-mentioned securities.

Comments

[JS Rosenberg:]

I like your thinking as I am a yield hog too. Check out Genuine Parts (GPC), Diageo (DEO), and KKR Financial (KFN)--it is in the process of de-certfiying as a REIT but still pays 8%. Another stock that is a nice yield that is increasing rapidly and that people don't immmediately think of as a big dividend payer is Home Depot (HD).

2007 May 28 07:54 PM