By Ann McQueen
Markets posted gains for the week ended Friday, August 26, as investors reacted favorably to Federal Reserve Chairman Ben Bernanke’s comments about the economy and possible future Fed action. We’ve identified five high dividend stocks at bargain prices that mirror Friday’s bullish tone. Our list includes two industrial REITs, a semiconductor designer and manufacturer, a life insurance company and a savings and loan.
Weyerhauser Company (WY) – WY trades ex-dividend on Tuesday, August 30, and this Seeking Alpha article looks at how investors can make gains through options and dividends. Another article looks at four critical areas – yield, payout ratio, balance sheet and growth – to analyze WY and to see how it stacks up against its peers. Its dividend yield is 3.5 percent, while Plum Creek Timber (PCL) is 4.4 percent, International Paper (IP) is .4 percent and Rock Tenn Company (RKT) is 1.5 percent. The opportunity comes a little more into focus when comparing earnings per share. WY comes in at $2.87. PLC is much lower, at $1.06. IP is close to WY at $2.93, and RKT boasts $3.48. A discussion of whether it is as much a bargain in the long term as it is in the short term can be found here. WY closed Friday at $17, near its 52-week low of $15.10. As discussed here, its share price is down considerably while IP has increased. A plan with Chevron (CVX) to develop technology for converting forest waste to fuel for transportation is in the works, and this positions WY as a promising long-term investment with a very nice yield.
Prologis Inc. (PLD) - In a move to enhance returns for investors, PLD announced last week that it sold $118 million in industrial property. Overall, analysts are optimistic about real estate investment trusts (REITS), particularly when the REITS hold properties in key industrial markets as PLD does. Even more, analysts remain bullish about PLD, expecting the stock to outperform through the end of the summer, as noted. An industry leader in market capitalization (No. 2 with $11.5 billion), PLD’s dividend yield of 4.5 percent is quite attractive. Its gross margin is higher than its competition at 72.29 percent. PS Business Parks Inc. (PSB) is 66.77 percent, and First Industrial Realty Trust (FR) is 67.3 percent. This is a positive indication that PLD can raise the capital to sustain its dividends.
Linear Technologies Corp. (LLTC) – Another strong company whose stock price has decreased with the overall market is LLTC. We are not alone in our optimism, as evidenced by this Seeking Alpha article. One analyst likes the competition, Analog Devices Inc. (ADI) because of its cash flow, as discussed here. A larger company with a gross margin of 67.02 percent, which is lower than LLTC’s 78.14 percent, and a lower dividend yield of 3.1 percent (LLTC’s is 3.5 percent), ADI saw analysts drop their recommendations over last week, as tracked here. Other forecasts by Bloomberg indicate LLTC may be able to raise its current dividend rate, which supports our bullish position. Other competitors include National Semiconductor Corporation (NSM), with a dividend yield of only 1.6 percent, and Texas Instruments Inc., with a dividend yield of a not-so-impressive 2 percent.
Manulife Financial Corporation (MFC) – Last week, MFC announced that it is launching 15 new funds, indicating that its potential for growth in the coming months is quite promising, as discussed in this article. Earlier this month, MFC also released quarterly earnings for nine of its funds, showing increases over the same quarter last year. Details are available here. A Seeking Alpha article looks at MFC’s financial leverage and low profitability, noting that analyst sentiments remain bullish for the provider of wealth management products. Compared to its competitors, MFC fares well with its dividend yield of 4.1 percent. Though ING Groep NV (ING) and MetLife Inc. (MET) boast higher gross margins at 41.09 percent and 35.56 percent respectively, compared to MFC’s 27.82 percent, they lack the dividend yield. MFC has been trading higher today than Friday’s closing price of $12.97, which is closer to the 52-week low of $10.88 than to the high of $19.5. MFC’s price to earnings ratio is 10.65 and earnings per share is $1.26. A comparison to its Canadian competitor, Sun Life Financial Inc. (SLF), causes pause. Though MFC is a promising addition to any dividend portfolio, SLF boasts a higher dividend yield of 5.7 percent, a lower price to earnings ratio of 7.78, and earnings per share of $3.42. Furthermore, SLF’s net income applicable to common shares for the period ended December 2010 is $1.593 million compared to MFC’s ($473,000).
New York Community Bancorp Inc. (NYB) – Among Reuters’ five biggest decreases in short interests over the first half of August (-32.91 percent), investors could feel that NYB’s share price will continue to rise in the coming months, though Friday’s closing price of $12.50 was still very close to the 52-week low of $11.48. Despite market skepticism surrounding the banking sector, at least one Seeking Alpha analyst believes NYB is among the bargains of the year, as discussed in this article. With a phenomenal dividend yield of 8 percent, earnings per share is more modest at $1.20. Its price to earnings ratio is 10.72. This analyst believes NYB is a strong contender for dividend investors nearing retirement. Compared to its competitors, NYB fares quite well. Citigroup Inc. (C) boasts a stronger earnings per share of $3.24, but fails to offer investors NYB’s dividend yield. Like C, JPMorgan Chase & Co. offers nice earnings per share of $4.68, but with a dividend yield of 2.8 percent fails to deliver in that regard. We feel NYB is definitely a bargain.