These five stocks offer income investors great opportunities in today’s unsteady markets. Though the companies represent different sectors and industries, they share all-star dividend track records and payouts. Specifically, these five stocks offer the best combination of valuation, profitability and likelihood of earnings multiple expansion due to growth that other stocks do not offer. I take a look at the key metrics that could help investors choose the stocks that best suit their needs.
Avon Products, inc. (AVP) – This manufacturer of cosmetics and other beauty products is currently trading near its one-year low at $18 a share. It has ranged from $17.55 to $31.60 over the past 52 weeks. Its dividend yield is 4.9 percent or $0.92 a share. Earnings per share is $1.71, and price-to-earnings ratio is 10.84. Market capitalization is $7.61 billion.
Its payout ratio is 54 percent. Not only has AVP paid a dividend since 1991, but the company has also increased its payout every year since then. The company offers a dividend reinvestment program. Its share price hasn’t fared so well. It has declined from its closing price of around $24 ten years ago, adjusted for a 2:1 stock split.
Financial results for the third quarter, which were released last week, were mixed. Revenue was up 6 percent year over year. Income from continuing operations was down to $165 million from $167 million year over year. Gross margin was down 40 basis points year over year to 63.9 percent. Company officials cite consumer uncertainty and unanticipated challenges with implementing its ERP in Brazil as reasons for the decline in income from operations. Management also lowered expectations for the year.
AVP’s competitor Revlon, Inc. (REV) is currently trading near $15 a share. It does not pay a dividend. Earnings per share is $6.22, and price-to-earnings ratio is 2.44. Market capitalization is $793.06 million. It closed at $6.35 ten years ago.
REV reported third quarter net sales of $337.2 million, up 5.7 percent year over year, which includes favorable currency exchange rates. Operating income was up to $44.8 million from $39.3 million for the same period last year. Net income of $0.1 million was down from $12.5 million for the same period last year. This includes a $22.1 million income tax charge. Company officials acknowledge that they continue to work within the constraints of the current global economic environment to maintain performance.
AVP’s dividend is extremely attractive. Management shows commitment not only to paying dividends but also to increasing payouts. Its price is attractive. Avon products also enjoy brand loyalty, and as the global economy improves, so should this company’s performance and payouts.
Ventas, Inc. (VTR) – This real estate investment trust with interests in healthcare facilities is currently trading near $56 a share. It has exhibited some price volatility, having fluctuated between $43.25 and $57.45 over the past 52 weeks. It has rebounded since reaching its low in early August. Its dividend yield is 3.2 percent or $1.79 a share. Earnings per share is $1.24, and price-to-earnings ratio is 44.96. Market capitalization is $16.01 billion.
VTR’s payout ratio is 175 percent. As a real estate investment trust, it must pay out 90 percent of its earnings or face steep federal tax repercussions. VTR offers a dividend reinvestment plan. Ten years ago, VTR closed at $12.15 a share.
VTR posted strong second quarter results. Funds from operations increased 26.5 percent to $141.5 million. The trust purchased $11 billion in new properties. Management expects to generate almost 70 percent of income from privately paying sources. Quarterly earnings are due Nov. 4.
Its competitor HCP, Inc. (HCP) is currently trading near $40 a share. Its dividend yield is 4.80 percent or $1.92. Earnings per share is $2.11, and the price-to-earnings ratio is 18.90. Market capitalization is $16.23 billion.
HCP’s payout ratio is 158 percent. Ten years ago, HCP closed near $37 a share. Third quarter funds from operations almost doubled, increasing to $259.6 million from $96.1 million year over year. HCP invested $43 million in capital projects, mainly in its life science and medical office segments.
In 2007, VTR sued HCP for obstructing its purchase of assets from Sunrise REIT for compensatory and punitive damages. A jury decided in VTR’s favor, awarding it $101 million in compensatory damages. HCP appealed the case but was directed by the court to pay. Though HCP has announced that it will pay, it has not yet. Industry experts say VTR will continue to pursue punitive damages.
As a REIT, VTR is highly likely to continue to pay dividends. It remains one of the strongest, most diversified REITs in the industry with exposure to nearly every different type of healthcare facility. Its basic metrics are strong, its performance history is solid, and its outlook is promising.
Nucor Corporation (NUE) – This steel manufacturer is currently trading near $38 a share. It has ranged from $29.82 to $49.24 over the past 52 weeks. Its dividend yield is 3.70 percent or $1.45. Earnings per share is $1.98, and price-to-earnings ratio is 19.07. Market capitalization is $11.98 billion.
NUE’s payout ratio is 74 percent. NUE has increased its payment for 38 consecutive years and is a U.S. Dividend Champion. Ten years ago, it closed near $41a share. The stock has split twice in the past decade. The company offers a dividend reinvestment plan.
NUE reported consolidated net earnings of $181.5 million for the quarter, which was up from $23.5 million for the same period last year. Pre-operating and startup costs for new plants were $17 million, which is down from $41.90 million for the same period last year. Expectations for steel demand are skeptical as economic indicators signal lower short-term demand.
Its competitor United States Steel Corp. (X) is currently trading near $25 a share. It has shown some price volatility over the past year with a 52-week range of $18.85 to $64.03. Its dividend yield is 0.70 percent or $0.20 a share. It is showing a loss per share of $0.53. Market capitalization is $3.65 billion.
According to the company’s website, quarterly dividends of $0.05 apiece have been paid for the past 11 quarters, including the third quarter ended Sept. 30. X closed at $14.35 ten years ago. The company does not offer a dividend reinvestment plan.
Net income for the quarter ended Sept. 30 increased to $22 million after a net loss of $51 million for the same period last year. Income from operations was $199 million, up from a loss of $138 million for the third quarter 2010. Company officials said results were driven by the flat-rolled and tubular business units.
NUE is a great choice for income portfolios. Though its short-term outlook may be less than ideal thanks to the current lagging economy, it remains a stable foundation stock suitable for long-term investors.
The Southern Company (SO) – This electric utility is currently trading near $43 a share. It has ranged from $35.73 to $43.95 over the past 52 weeks. Its dividend yield is 4.40 percent or $1.89. Earnings per share is $2.45, and price-to-earnings ratio is 17.64. Market capitalization is $37.05 billion.
SO’s payout ratio is 79 percent. The company boasts a strong track record of payments but is not included on the list of U.S. Dividend Champions. A 2001 spin-off resulted in what looks like a higher than normal payment that decreased the following year. Ten years ago, SO was trading near $24 a share.
Third quarter earnings totaled $916 million, up from $817 million the same period last year. Third quarter revenue was $5.43 billion, which was 2 percent higher than $5.32 billion for the same period last year. Company officials said that economic recovery is under way but at a slower pace than expected.
Its competitor NextEra Energy Inc. (NEE) is currently trading near $56 a share. It has ranged from $49 to $58.98 over the past 52 weeks. Its dividend yield is 3.90 percent or $2.20. Earnings per share is $4.40, and price-to-earnings ratio 12.66.
Its payout ratio is 48 percent. NEE has increased dividends for the past 15 consecutive years. Ten years ago, NEE was trading at $26.55. Second quarter earnings showed net income of $580 million, which was up from $417 million year over year. Third quarter results are due out Nov. 4. Industry experts expect profit per share to decline by 2.1 percent year over year.
SO is a great choice for dividend investors. It is a stable stock that shows some resistance to price volatility. It offers a dividend reinvestment plan. As an electric utility, its service will always be needed.
NYSE Euronext, Inc. (NYX) – The operator of the New York Stock Exchange and many others is currently trading near $25 a share. It has ranged from $21.80 to $41.60 over the past 52 weeks. Its dividend yield is 4.30 percent or $1.20. Earnings per share is $2.17, and price to earnings ratio is 11.65. Market capitalization is $6.63 billion.
Its payout ratio is 55 percent. Its dividend history dates to 2007. NYX began trading publicly in 2006, so a ten-year comparison is not available. NYX does not offer a dividend reinvestment plan.
Second quarter results show net income of $154 million, down from $184 million for the same period last year. Merger expenses and exit fees are included in the second quarter 2011 numbers. Year-to-date revenue is running about 3 percent over last year. Fixed operating expenses are lower year over year. Third quarter earnings will be announced Nov. 3.
Nasdaq OMX Group Inc. (NDAQ) is trading near $24 a share and has ranged from $20.32 to $29.71 over the past 52 weeks. It does not pay a dividend. Earnings per share is $2.39, and price-to-earnings ratio is 10.23. Market capitalization is $4.33 billion.
NDAQ posted strong third quarter results with net income of $110 million, which compares with $101 million for the same period last year. Net exchange revenue set a record at $438 million, which was 18 percent higher year over year. It, too, only recently began trading publicly, so pricing history is limited.
Though NYX has only recently begun trading publicly, it is a very promising choice for dividend investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.