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This article examines five dividend aristocrats with a dividend payment history of at least 20 years and a history of consecutively increasing their dividend payments for 20-plus years. Aside from HPC, all the other players have dividend payment histories in excess of five decades and histories of consecutive dividend increases in excess of 30 years.

Dividend players would do well to wait for strong pullbacks before committing large sums of new money to the market. One way to minimize the effects of this wild action would be to sell covered calls against the stock you already own. The benefit of this is that it provides an additional stream of income, and it also helps lower your overall net per share cost. Another option would be to sell naked puts. Only employ this option if you are bullish on the stock. If the stock trades below the strike price of the puts you sold, you will be assigned the shares. This is a great way to buy a stock at the price you want and get paid for waiting.

As we feel the markets are going to mount a strong correction this year, dividend investors should also consider purchasing puts as a hedge against a potentially strong sell off.

Our favourite play on the list is HCP Inc. (HCP). HCP has a quarterly revenue growth rate of 40.30%, a quarterly earnings growth (year over year) of 660%, a ROE of 7.8%, a five-year dividend growth rate of 2.47%, a five-year dividend average of 5.50%, and a total three-year return of 76%. While net income took a hit in 2009 and 2010, 2011 could be a stellar year for HCP as net income could potentially soar well past the $670 million mark; a 100% plus gain over its 2010 net income.

Two other notable plays are Exxon Mobil Corp (XOM), and Kraft Foods, Inc. (KFT) with yields of 2.2% and 3.10% respectively.

Exxon Mobil Corp has been paying dividends since 1882, has increased them consecutively for 28 years, has a three-year total return of roughly 15%, a quarterly earnings growth rate of 40.5% (which is very good for a company with such a large market cap), a quarterly revenue growth rate of 31.5%, a ROE of 26.85%, a five year EPS growth rate of 1.95% and incredibly large levered free cash flow rate of $21 billion. Net income for the past three years is as follows; in 2008, it stood at $45 billion, in 2009 it dropped down to $19 billion and in 2010 it jumped up again to $30.4 billion. For 2011, net income so far is $31.5 billion.

Exxon Mobil Corp per share data

Exxon Mobil Corp valuation ratios

Earnings 8.30

Sales 94.61

Cash Flow 11.83

Price Earnings 10.20

Price/Sales 0.90

Price/Book 2.61

Price/Cash Flow 7.20

Kraft Foods, Inc. has been paying dividends since 2001, has a three-year total return of roughly 52.2%, a five-year dividend average of 3.92%, a quarterly earnings growth rate of 22.3%, a quarterly revenue growth rate of 11.3%, a ROE of 9.07%, an operating cash flow of $4.19 billion and a healthy levered free cash flow rate of $2.92 billion.

Kraft Foods, Inc. per share data

Kraft Foods, Inc. valuation ratios

Earnings 1.82

Sales 30.25

Cash Flow 2.71

Price Earnings 20.50

Price/Sales 1.23

Price/Book 1.850

Price/Cash Flow 13.80

Novice investors should familiarize themselves with some of the following metrics before deploying money into high-yielding dividend stocks.

Enterprise value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company's value contrary to simply looking at the Market cap.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa. Individuals searching for smaller cap stocks that offer high yields might find this article interesting, "Small Caps With Superior Yields Up To 10.2%."

Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt; the cash flow is what pays the bills.

The payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders, then they are making; this situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for some time. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever.

Stock

Dividend

Market Cap

PE

EBITDA

Quarterly earnings growth

Beta

Revenue

Cash flow

PBI

8.0%

3.7B

8.5

1.09B

-3.4%

1.16

5.37B

1.04B

HCP

4.60%

16,89B

14.8

1.31B

40.3%

1.21

1.61B

736M

ADM

2.4%

19B

8.5

3.72B

30%

0.63

85.78B

618M

MO

5.5%

60.9B

13

6.76B

-3.0%

0.34

16.4B

3.61B

ABT

3.4%

87.5B

11

11.03B

13.2%

0.32

38.4B

9.89B

Pitney Bowes Inc. (PBI)

Pitney Bowes has an enterprise value of $7.18 billion and price/sales value of 0.68. PBI has a price/cash flow ratio of 5.10, a price to book of 0.00, price/sales of 0.68, and price earnings of 8.80. It also sports earnings per share of 2.81, sales per share of 26.91, and a cash flow per share of 3.60.

PBI has a quarterly revenue growth (yoy) of -3.4%, a very strong quarterly earnings growth rate of 94.3%, a sizzling ROE for 164%, a five-year dividend growth rate of 3.52%, and has been paying dividends since 1934. It has a rather robust levered free cash flow rate of $888 million. Net income for the past three years is as follows; in 2008, it stood at $419 million, in 2009 it moved up a bit to $444 million and in 2010, it dropped down to $310 million. Net income for 2011 so far is roughly $360 million.

Earnings Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

0.60

0.49

2.25

2.16

No. of Analysts

4.00

2.00

4.00

5.00

Low Estimate

0.57

0.47

2.01

2.05

High Estimate

0.62

0.51

2.35

2.35

Year Ago EPS

0.66

0.53

2.23

2.25

Revenue Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

1.37B

1.29B

5.32B

5.28B

No. of Analysts

4

2

5

5

Low Estimate

1.34B

1.29B

5.28B

5.18B

High Estimate

1.39B

1.29B

5.35B

5.39B

Year Ago Sales

1.43B

1.32B

5.43B

5.32B

Sales Growth (year/est)

-4.30%

-2.60%

-1.90%

-0.80%

  1. ROE 164.71%
  2. Return on assets 6.14
  3. Total debt $4.52 B
  4. 200 day moving average $19.97
  5. Book value $-0.23
  6. Dividend yield 5 year Average 5.80%
  7. Dividend rate $ 1.48
  8. Consecutive dividend increases 30 years
  9. Dividend growth rate 5 year average 2.96%
  10. Paying dividends since 1934
  11. Total return last 3 years -8.35%
  12. Total return last 5 year -44%

PBI needs a weekly close above 19.15 to turn the picture bullish, and a weekly close above 21 should lead to a test of the 24-25 ranges. A daily close below 18 will most likely result in a re test of the lows, which if it occurs on a low volume would make for a nice place to open up additional longs.

HCP, Inc. (HCP)

It has an enterprise value of $24.8 billion, a quarterly revenue growth rate of 40.30%, a quarterly earnings growth (year over year) of 660%, a ROE of 7.8%, a five-year dividend growth rate of 2.47%, a five-year dividend average of 5.50%, a total three-year return of 76%, and it has been paying dividends since 1990. It has a levered free cash flow rate of -$3.76 billion.

Net income for the past three years is as follows; in 2008, it came in at $448 million, in 2009 it dropped sharply to $131 million and in 2010, it moved up to $330 million. Net income for 2011 so far stands at $ 470 million; potentially, net income could soar well past the $670 million ranges. HCP has a beta above 1.1, which makes it a good candidate for writing covered calls on; covered calls potentially provide fixed income investors with an extra stream of income.

  1. Price to sales 10.35
  2. Price to tangible book 2.00
  3. Price to cash flow 27.80
  4. Price to free cash flow -3.70
  5. 5 year sales growth 17.35%
  6. Inventory turnover N/A
  7. Asset turnover 0.10

Earnings Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

0.68

0.69

2.52

2.80

No. of Analysts

13.00

14.00

5.00

19.00

Low Estimate

0.66

0.67

2.49

2.72

High Estimate

0.73

0.71

2.54

2.86

Year Ago EPS

0.64

0.40

2.23

2.52

Revenue Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

452.74M

445.28M

1.64B

1.87B

No. of Analysts

8

5

6

8

Low Estimate

420.41M

422.48M

1.61B

1.70B

High Estimate

477.60M

456.65M

1.76B

1.97B

Year Ago Sales

276.12M

293.00M

1.04B

1.64B

Sales Growth (year/est)

64.00%

52.00%

57.50%

14.00

  1. ROE 7.88%
  2. Return on assets 4.09%
  3. 200 day moving average $36.86
  4. Total debt $7.6B
  5. Book value $21.68
  6. Dividend yield 5 year Average 5.5%
  7. Dividend rate $1.92
  8. Payout ratio 127%
  9. Dividend growth rate 5 year average 2.47%
  10. Consecutive dividend increases 21 years
  11. Paying dividends since 1990
  12. Total return last 3 years 76.3%
  13. Total return last 5 years 36.3%

Archer Daniels Midland Co. (ADM)

It has an enterprise value of $26.78 billion, a quarterly revenue growth rate of 30.4%, a ROE of 12.65%, a five-year dividend growth rate of 10.41%, a five-year dividend average of 1.8%, a total three-year return of 5.9%, and it has been paying dividends since 1927. It has a levered free cash flow rate of -$2.2 billion.

Net income for the past three years is as follows; in 2008, it came in at $1.6 billion, in 2009 it moved up to $1.9 billion and in 2010, it moved up to $2.03 billion. Net income for 2011 so far stands at $1.4 billion. The dividend increased from $016 to $0.1750.

  1. Price to sales 0.22
  2. Price to tangible book 1.07
  3. Price to cash flow 6.40
  4. Price to free cash flow -13.90
  5. 5 year sales growth 13.9%
  6. Inventory turnover 8.00
  7. Asset turnover 2.20

Earnings Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Jun 12

Next Year

Jun 13

Avg. Estimate

0.77

0.79

2.98

3.36

No. of Analysts

14.00

14.00

12.00

14.00

Low Estimate

0.70

0.69

2.82

3.15

High Estimate

0.95

0.95

3.20

3.70

Year Ago EPS

1.06

0.86

3.47

2.98

Revenue Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Jun 12

Next Year

Jun 13

Avg. Estimate

23.10B

21.61B

89.56B

91.68B

No. of Analysts

9

9

13

11

Low Estimate

21.46B

20.58B

83.70B

84.88B

High Estimate

25.30B

23.10B

95.57B

98.92B

Year Ago Sales

20.93B

20.08B

80.68B

89.56B

Sales Growth (year/est)

10.40%

7.60%

11.00%

2.40

  1. ROE 12.65%
  2. Return on assets 4.66%
  3. 200 day moving average $28.56
  4. Total debt $9.05B
  5. Book value $27.52
  6. Dividend yield 5 year Average 1.80%
  7. Dividend rate $0.70
  8. Payout ratio 20%
  9. Dividend growth rate 5 year average 10.41%
  10. Consecutive dividend increases 37 years
  11. Paying dividends since 1927
  12. Total return last 3 years 5.9%
  13. Total return last 5 years -1.77

Altria Group Inc. (MO)

It has an enterprise value of $71.5 billion, a quarterly revenue growth rate of -3.0%, a ROE of 72%, a five-year dividend growth rate of -11.%, a five-year dividend average of 8.4%, a total three-year return of 121% and has been paying dividends since 1928. It has a levered free cash flow rate of $4.66 billion.

Net income for the past three years is as follows; in 2008, it came in at $4.93 billion, in 2009 dropped to $3.2 billion and in 2010, it moved up to $3.9 billion. Net income for 2011 so far stands at $2.5 billion.

  1. Price to sales 3.72
  2. Price to tangible book -4.74
  3. Price to cash flow 16.40
  4. Price to free cash flow 196.70
  5. 5 year sales growth -25%
  6. Inventory turnover 4.50
  7. Asset turnover 0.40

Earnings Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

0.49

0.49

2.04

2.19

No. of Analysts

10.00

7.00

11.00

12.00

Low Estimate

0.47

0.46

2.01

2.15

High Estimate

0.51

0.52

2.05

2.23

Year Ago EPS

0.44

0.44

1.90

2.04

Revenue Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

4.24B

4.03B

16.93B

17.23B

No. of Analysts

6

6

7

8

Low Estimate

4.17B

3.96B

16.53B

16.93B

High Estimate

4.29B

4.18B

17.02B

17.64B

Year Ago Sales

4.14B

3.94B

16.89B

16.93B

Sales Growth (year/est)

2.40%

2.10%

0.20%

1.80%

  1. ROE 72.12%
  2. Return on assets 10.94%
  3. 200 day moving average $27.14
  4. Total debt $13.69B
  5. Book value $2.15
  6. Dividend yield 5 year Average 8.4%
  7. Dividend rate $2.28
  8. Payout ratio 94%
  9. Dividend growth rate 5 year average -11.3%
  10. Consecutive dividend increases 46 years
  11. Paying dividends since 1928
  12. Total return last 3 years 121%
  13. Total return last 5 years 81%

Abbott Laboratories (ABT)

It has an enterprise value of $96.34 billion, a quarterly revenue growth rate of 13.2%, a ROE of 19/71%, a five-year dividend growth rate of 10.14.%, a five-year dividend average of 2.9%, a total three-year return of 16.38% and has been paying dividends since 1926. It has a levered free cash flow rate of $9.06 billion.

Net income for the past three years is as follows; in 2008, it came in at $4.8 billion, in 2009 moved up to $5.7 billion and in 2010, it dropped even down to $4.6 billion. Net income for 2011 so far stands at $3.3 billion. Unless the income for the next quarter exceeds $1.4 billion, net income will drop for 2 years in a row.

  1. Price to sales 2.28
  2. Price to tangible book -36.19
  3. Price to cash flow 11.40
  4. Price to free cash flow 19.40
  5. 5 year sales growth 10.66%
  6. Inventory turnover 3.80
  7. Asset turnover 0.70

Earnings Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

1.43

1.05

4.65

5.03

No. of Analysts

17.00

11.00

23.00

25.00

Low Estimate

1.37

0.94

4.59

4.62

High Estimate

1.45

1.19

4.67

5.39

Year Ago EPS

1.30

0.91

4.17

4.65

Revenue Est

Current Qtr.

Dec 11

Next Qtr.

Mar 12

Current Year

Dec 11

Next Year

Dec 12

Avg. Estimate

10.61B

9.61B

39.03B

40.73B

No. of Analysts

15

8

23

23

Low Estimate

10.39B

9.38B

38.49B

39.74B

High Estimate

10.91B

9.80B

39.38B

41.92B

Year Ago Sales

9.97B

9.04B

35.17B

39.03B

Sales Growth (year/est)

6.40%

6.30%

11.00%

4.40%

  1. ROE 19.71%
  2. Return on assets 8.47%
  3. 200 day moving average $52.42
  4. Total debt $16.7B
  5. Book value $15.79
  6. Dividend yield 5 year Average 2.90%
  7. Dividend rate $1.92
  8. Payout ratio 65%
  9. Dividend growth rate 5 year average 10.14%
  10. Consecutive dividend increases 39 years
  11. Paying dividends since 1926
  12. Total return last 3 years 16.38%
  13. Total return last 5 years 31%

Conclusion

Dividend players are starting to gravitate to MLPs as of late as many of them are offering rather high distributions with relatively low risk. Investors might find our latest article on the topic to be of interest where we look at 7 stocks with yields as high as 9.2%.

As we have been stating for some time now, though we expect the SPX to test the 1305-1325 ranges with the possibility of trading as high as 1335 on an intra day basis, our longer-term outlook is calling for a strong correction. Hence long term players would be best served by waiting for this strong pull back to materialize before committing large sums of money into the market. On the 16th of December, we made the following comments; the first part has come to pass, and the second part is unfolding right now.

On a short-term basis, the Dow has put in a bottom and is getting ready to challenge the 12,000 ranges again. However, there is a chance that the recent lows could be tested before the rally gathers steam. Going out a little further, the cycles suggest that the Dow should be able to rally until early next year and there is a fairly good chance that the Dow could trade to the 12,800 ranges and the and the SPX could trade to the 1305-1330 plus ranges with the possibility of mounting an intra-day spike to the 1340 ranges. The dollar is overbought and has generated a few sell signals on the hourly time frames, so a pullback, here would help drive commodities and the general market higher.

On an article that we wrote on the 26th but that was published on the 27th, we made the following comments, which have also come to pass, for the most part.

Going forward, we think that the markets could put in a short term top around the 27-29th of this month. The pullback should provide traders with a good opportunity to open up long positions.

Earnings estimates and revenue estimates data was sourced from finance.yahoo.com

Source: 5 Dividend Aristocrats With Great Yields