By Thomas Hughes
Dividend is the word for 2012. The Dow (DIA) finished up about 6% from 2010. The less dividend-centric Nasdaq (QQQ) ended down about 1.5% over the same period. The stocks on the Dow aren't likely to grow in 2012. The outlook for the year is gloomy, at least for the first half. But the stocks have been improving over the last 6 months. The Dow is up nearly 2,000 points from its 52-week low in October. The Nasdaq is up from the same time frame, but only a comparable 50%. What's the difference? The Dow comprises only stocks that produce dividends.
Market direction is uncertain. Even with a modest 6% increase, the Dow basically traded flat for the year. Uncertainty from Europe and Asia, the inherently volatile nature of technology and growth stocks plus mixed data concerning the domestic recovery has the average investor spooked. But he isn't absent from the market. Investors are returning to more traditional styles of investing, waiting for the bull to come back. The funny thing is, this just the type of investing the country needs to really get value back into our economy.
If the blue chips turn you off, fundamental screens can easily help you find good dividend producing stocks. Some of the criteria I use include volume, p/e ratios, dividend amount, yield, price and debt to equity. I like stocks that trade at least 2 million shares daily, that lets me know the company is taken seriously and has adequate liquidity. After that, yield, value and profitability are my key factors. Theses stocks may not increase in value, but they have some stability while I collect dividend payments.
Ameren Corporation (AEE) is a power company servicing the Midwest and is yielding a nice 4.77%. It is also breaking above long term resistance with increasing volume. The volume is probably due to an increase in dividend. Fundamentally Ameren looks good as well: P/E is just over 12, large institutional investment is supported by a big bounce from the 200 day moving average early in this fall. Earnings for 2011 beat expectations and grew from the same period last year. Earnings increases are linked to debt reduction, increased rates and favorable conditions. Earnings for next year are expected to increase $2.30/share.
Ameren is the lowest valued of the six electrical producers with an average hold rating by p/e that yield at least 2%. The group also includes Southern Co (SO), Nisource (NI), Dominion Resources (D), Constellation Energy Group (CEG) and Duke Energy (DUK). Ameren is the laggard of this select group, up 17% for the year. The other five are each up at least 20%. Southern Company finished the year up 20% and Nisource (N) led the group with a 33.5% advance for the year. Analyst upgrades and continued performance will be a catalyst for Ameren. My price targets are $40 and $47.50.
CBL and Associates Properties, Inc (CBL) is a Real Estate Investment Trust based in Chattanooga, TN. Real estate is ever a good investment, especially when you buy at the right time. Now might not be the best time, but it certainly is an OK time. In a recent conference call CBL CEO Stephen Lebovitz had promising things to say about the growth of retail spending, which directly impacts CBL's bottom line. CBL manages and develops malls, community centers and office properties through its two subsidiary companies. CBL is currently yielding 5.28%. With earnings per share of $2.00 projected into 2012. CBL has been working on reducing debt and increasing revenue. Current stock price is around $15, approaching long term resistance. Indicators predict some sideways movement but the yield and financial improvements will keep investors interested.
Competitor Kimco Realty Corporation (KIM) is in a similar position. Kimco also yields an attractive dividend (4.68%) but falls short of CBL's 5.28%. Kimco's potential is already priced into the shares. Kimco is trading around $16.25 with a p/e of 13.88. CBL is trading around 7 times earnings near $15, leaving it room to double or more.
Campbell Soup Company (CPB) is another great dividend stock. Stock price is supported by high insider (42.2%) and institutional (40.5%) ownership. Growth expectations for 2012 will be offset by investment in growth. Current eps is $2.41 with a minor gain to $2.51 expected for next year. Campbell is not a growth stock; you buy it for the dividend of 3.48%. Campbell will undoubtedly continue to trade in a range between $25 and $35, providing opportunities for dollar-cost averaging.
Campbell is implementing a three-pronged approach to increased revenues and profits in 2012. It is planning to grow North American Soups and Simple Meals, international presence and its line of healthy beverages and baked snacks. Sales declined by 1% in the first quarter of fiscal 2012, with EBIT down 6% compared to the same quarter last year. Earnings per share were inline with the previous year and full year guidance remains in effect.
Campbell faces a couple of challenges moving forward: Increasing costs of juice and juice concentrates, plus increased competition from existing and new companies. Competitor General Mills (GIS) announced sales increased in Q2 of fiscal 2012(comparable to CPB's Q1) by 14%, attributed to the acquisition and sales of Yoplait International. Kellogg (K) also announced an improvement in sales. They were able to increase revenue by 3% on an international basis during the previous quarter, Q3 2011.