Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message| ()  

The payout ratio, or the ratio of dividends to earnings, expresses how much of its earnings a company decides to pay to shareholders in the form of dividends. Very high payout ratios are considered unsustainable.

When a company increases its dividend while the payout ratio falls, it is an especially good sign because it implies that earnings are increasing and dividends are increasing, while dividend sustainability is not compromised.

We ran a screen on stocks exhibiting these two trends: a rise in dividends, comparing the current year dividend per share estimate to last year’s dividend per share, while also seeing a decrease in the payout ratio over the same period. We then screened for those stocks that have seen significant net institutional purchases over the current quarter.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six 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 dividend yields? Use this list as a starting point for your own analysis (list sorted by net institutional purchases as a percent of share float):

1. Weight Watchers International, Inc. (WTW): Personal Services Industry. Market cap of $4.55B. Dividend yield at 1.13%, payout ratio at 20.28%. Current year dividend per share estimate at $0.71 vs. last year dividend per share at $0.70. TTM payout ratio at 20.28% vs. 3-year average at 27.13%. Net institutional purchases over the current quarter at 7.7M, which is 21.94% of the company's 35.09M share float. The stock has had a couple of great days, gaining 7.53% over the last week.

2. Covidien plc (COV): Medical Instruments & Supplies Industry. Market cap of $24.61B. Dividend yield at 1.60%, payout ratio at 21.92%. Current year dividend per share estimate at $0.78 vs. last year dividend per share at $0.74. TTM payout ratio at 21.92% vs. 3-year average at 25.24%. Net institutional purchases over the current quarter at 68.4M, which is 13.98% of the company's 489.20M share float. The stock has had a couple of great days, gaining 13.18% over the last week.

3. MetLife, Inc. (MET): Life Insurance Industry. Market cap of $36.40B. Dividend yield at 2.15%, payout ratio at 32.87%. Current year dividend per share estimate at $0.91 vs. last year dividend per share at $0.74. TTM payout ratio at 32.87% vs. 3-year average at 47.89%. Net institutional purchases over the current quarter at 64.1M, which is 7.63% of the company's 840.46M share float. The stock has had a couple of great days, gaining 5.13% over the last week.

4. AmTrust Financial Services, Inc. (AFSI): Property & Casualty Insurance Industry. Market cap of $1.31B. Dividend yield at 1.65%, payout ratio at 11.0%. Current year dividend per share estimate at $0.30 vs. last year dividend per share at $0.29. TTM payout ratio at 11.0% vs. 3-year average at 16.30%. Net institutional purchases over the current quarter at 862.7K, which is 4.88% of the company's 17.68M share float. Might be undervalued at current levels, with a PEG ratio at 0.64, and P/FCF ratio at 9.54. The stock is a short squeeze candidate, with a short float at 11.88% (equivalent to 11.74 days of average volume). The stock has had a couple of great days, gaining 5.06% over the last week.

5. Fulton Financial Corp. (FULT): Regional Banks Industry. Market cap of $1.69B. Dividend yield at 2.36%, payout ratio at 22.96%. Current year dividend per share estimate at $0.19 vs. last year dividend per share at $0.12. TTM payout ratio at 22.96% vs. 3-year average at 87.91%. Net institutional purchases over the current quarter at 7.8M, which is 3.98% of the company's 196.07M share float. The stock is currently stuck in a downtrend, trading 13.31% below its SMA20, 17.94% below its SMA50, and 18.55% below its SMA200. The stock has performed poorly over the last month, losing 18.87%.

6. Cliffs Natural Resources Inc. (CLF): Steel & Iron Industry. Market cap of $11.26B. Dividend yield at 1.45%, payout ratio at 6.39%. Current year dividend per share estimate at $0.70 vs. last year dividend per share at $0.51. TTM payout ratio at 6.39% vs. 3-year average at 14.22%. Net institutional purchases over the current quarter at 5.0M, which is 3.45% of the company's 145.11M share float. This is a risky stock that is significantly more volatile than the overall market (beta = 2.37). The stock has had a couple of great days, gaining 14.06% over the last week.

7. Wells Fargo & Company (WFC): Money Center Banks Industry. Market cap of $132.10B. Dividend yield at 1.92%, payout ratio at 7.65%. Current year dividend per share estimate at $0.49 vs. last year dividend per share at $0.20. TTM payout ratio at 7.65% vs. 3-year average at 31.05%. Net institutional purchases over the current quarter at 87.4M, which is 1.77% of the company's 4.93B share float. Might be undervalued at current levels, with a PEG ratio at 0.75, and P/FCF ratio at 4.73. The stock has had a couple of great days, gaining 9.11% over the last week.

8. Packaging Corp. of America (PKG): Packaging & Containers Industry. Market cap of $2.42B. Dividend yield at 3.36%, payout ratio at 31.76%. Current year dividend per share estimate at $0.78 vs. last year dividend per share at $0.60. TTM payout ratio at 31.76% vs. 3-year average at 40.45%. Net institutional purchases over the current quarter at 1.4M, which is 1.43% of the company's 97.86M share float. The stock has performed poorly over the last month, losing 14.02%.

*Institutional data sourced from Fidelity; dividend per share data sourced from Screener.co; all other data sourced from Finviz.

Source: 8 Stocks Playing Dividends Right Could Reward Investors