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These seven stocks have great stories, positive catalysts for future growth, above industry average profit margins and pay a hefty dividend. These are bullish indicators regarding a stock's possible future performance. Robust profit and sales margins are traits of notable names and the dividend yields are a noteworthy additional benefit. Moreover, most of these stocks are trading well below consensus analysts’ estimates. Several have recent upgrades and positive analyst comments. There may be more volatility in front of us even with the more than 10% drop in the market recently. Nevertheless this may be a good point to start a position in these highly profitable, high yield dividend paying opportunities. As Warren Buffett says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

After the precipitous drop in the Dow in 2008, the high dividend payers were the first to recover. Seven top mid cap or better stocks with above industry average profit margins and a dividend yield of 6% or greater are Frontier Communications Corporation (NASDAQ:FTR), Windstream Corporation (NASDAQ:WIN), CenturyLink, Inc. (NYSE:CTL), Pitney Bowes Inc. (NYSE:PBI), New York Community Bancorp Inc. (NYB), R.R. Donnelley & Sons Company (NASDAQ:RRD) and Senior Housing Properties Trust (NYSE:SNH).

My dividend investing approach is based on constructing a portfolio of stocks with exceptional dividend yields that generate money throughout the year. Characteristically, dividend investing is popular among retirees and those who wish to live on their savings and are no longer able to work. One reason to invest in dividend-paying stocks now is due to the fact they will be the investment of choice to fund the retirement of many Baby Boomers, which will create enormous demand for these stocks. Dividend-paying stocks have the potential for both capital gain and income production. Boomers will be looking for stocks that have a track record of increasing dividends, giving them yet another hedge against inflation. This combination will be necessary to fund the lengthening retirement that comes with a greater life expectancy.

Combining these factors with the Fed’s recent announcement that rates will remain at ultra-low levels for at least the next two years, we can see that fixed income instruments such as bonds and CDs provide little protection against inflation. Factor this in with the fact that historically, dividend-paying stocks have outperformed non-dividend-paying stocks, and you have a recipe for outstanding returns.

Below is a summary of each company’s dividend and EPS growth details followed by a brief description of each company, a summary of current analysts' estimates and up/downgrade activity and a chart of the company's key statistics. I would scale in to any position a quarter or a tenth at a time. Please use this as a starting point for your own due diligence.

Dividend and EPS Statistics

Click on image to enlarge


Company Reviews

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. The company is trading below analysts' estimates. Frontier has a median price target of $8.50 by 15 brokers and a high target of $10. The last up/downgrade activity was on Mar 16, 2011, when Stifel Nicolaus upgraded the company from Hold to Buy.

Windstream Corporation, together with its subsidiaries, provides various telecommunications services primarily in rural areas in the United States. It offers phone, high-speed Internet, and digital television services. The company is trading below analysts' estimates. Windstream has a median price target of $14.13 by 12 brokers and a high target of $18.50. The last up/downgrade activity was on Feb 23, 2011, when DA Davidson upgraded the company from Neutral to Buy.

CenturyLink, Inc., together with its subsidiaries, operates as an integrated communications company. The company is trading significantly below analysts' estimates. CenturyLink has a median price target of $46 by 17 brokers and a high target of $50. The last up/downgrade activity was on Aug. 5, when DA Davidson upgraded the company from Underperform to Neutral.

Pitney Bowes Inc. provides mail processing equipment and integrated mail solutions worldwide. It offers a suite of equipment, supplies, software, services, and solutions for managing and integrating physical and digital communication channels. The company is trading significantly below analysts' estimates. Pitney Bowes has a median price target of $23 by 4 brokers and a high target of $25. The last up/downgrade activity was on Sep 17, 2009, when Brean Murray upgraded the company from Hold to Buy.

New York Community Bancorp, Inc. operates as a multi-bank holding company for New York Community Bank and New York Commercial Bank, which offer banking products and services in New York, New Jersey, Ohio, Florida, and Arizona. The company is trading significantly below analysts' estimates. New York Community Bancorp has a median price target of $17 by 20 brokers and a high target of $21. The last up/downgrade activity was on Feb 12, 2010, when Standpoint Research downgraded the company from Buy to Hold.

R.R. Donnelley & Sons Company provides pre-media, printing, logistics, and business process outsourcing products and services to private and public sectors worldwide. The company is trading significantly below analysts' estimates. R.R. Donnelley & Sons has a median price target of $22 by 4 brokers and a high target of $26. The last up/downgrade activity was on Aug 3, 2011, when Robert W. Baird downgraded the company from Outperform to Neutral.

Senior Housing Properties Trust, a real estate investment trust (REIT), primarily invests in senior housing properties in the United States. The trust invests in hospitals, nursing homes, senior apartments, independent living properties, and assisted living properties. The company is trading below analysts' estimates. Senior Housing Properties Trust has a median price target of $24 by 8 brokers and a high target of $27. The last up/downgrade activity was on Apr 29, 2011, when Stifel Nicolaus downgraded the company from Buy to Hold.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 7 Profitable High Yield Dividend Safe Haven Plays