It's always nice to add some yield to your portfolio. Nothing beats watching a stock you're already earning 4-6% on continually grow earnings to get you to a 12% total return. The cherry on top is if that stock continually grows its dividend without affecting their payout ratio too greatly. I did my best to find five stocks that may be able to provide you these types of results:
- Southern Copper (NYSE:SCCO) - Please do some due diligence on this one. The new political regime in Peru may result in the copper mines being nationalized and/or taxes being raised sharply. The risk in Southern Copper is definitely apparent. My feeling, however, is that the worst case scenario doesn't play out and the big dividend softens the risk while we wait and find out. The current dividend is a very nice 6.68%, and the company has been increasing their dividend at a pace of 27% over the past five years. The company has consistently been growing earnings. With 5 year growth estimates of 20%, investors can achieve a nice dividend-growth balance. I'd argue the stock is a value play as well, considering its .56 PEG ratio and forward P/E of 9.1. Weigh the risk vs. Reward, but this should be a great stock to own for the next several years.
- Verizon (VZ) - Seemingly more expensive than AT&T (NYSE:T), I believe the current valuation is very fair. The service is simply much better in most areas of the country, and quality will always win out in the end. The dividend is currently 5.5%, and the five year growth average is 3%. The key factor for Verizon's dividend going forward will be its ability to grow earnings. With expectations for 8.5% EPS growth going forward and management that has executed in the past, it should be able to deliver solid total shareholder return. In addition, Verizon is a nice play on Apple's (NASDAQ:AAPL) success with the iPhone. Continued weakness from Research in Motion's (RIMM) Blackberry has allowed the iPhone to gain even more market share. More iPhone sales and therefore contracts will help bring in more revenue for Verizon.
- Statoil (NYSE:STO) - This Norwegian oil driller can give you some international exposure to go along with its dividend growth benefits. A current annualized yield of 4.81% and a five year history of 15% annual dividend growth makes the stock an attractive dividend stock, while its consistent earnings growth and 8% long term EPS growth should additionally aid total return. Its low 30% payout also lends some credibility to its long term financial health. Incredibly, the stock trades at 6.2 times earnings.
- GlaxoSmithKline (NYSE:GSK) - This British drug company has a very deep, diverse pipeline with blockbuster products like Nicorette, whose sales should only pick up steam in the United States as more and more people attempt to quit smoking. On the dividend front, GSK offers a 4.9% dividend, which is a 19% increase over last year. A history of earnings growth and a forward P/E of 10 make this a very compelling dividend growth stock.
- Phillip Morris International (NYSE:PM) - Although cigarette use is slowing in the U.S., Asian markets are thriving. PM derives all of its profits outside of the U.S, the majority of which coming from Asia. Earnings are expected to grow at 11.5% per annum for the next 5 years. The stock has a 3.67% dividend, which is 10% higher than last year. Additionally, tobacco stocks are notorious safe havens in down markets.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.