Dividend investors usually don't go for stocks that yield less than 5% because they usually rely on the dividend income for their daily expenses. Younger, conservative investors have more options though. Instead of opting for low growth stocks with modestly high dividend yields, they can invest in stocks that have lower yields but grow at a much faster pace. These companies signal their willingness by offering dividends and they are more likely to boost their dividends significantly as their profits increase. The companies on this list are high-growth. They are estimated to have EPS growth of greater than 25% on average per annum over the next five years. They also have market caps over $2 billion and pay dividend yields over 2%.
Arch Coal, Inc. (NYSE:ACI) is an industrial metals and minerals company with a $2.92 billion market cap. ACI pays a 3.19% dividend yield. The company's EPS is expected to grow 32.96% per annum over the next five years. It recently traded at $13.81 a share. ACI has a one-year target estimate of $25.33 a share. Compared to the $4.44 billion market cap Alpha Natural Resources (ANR), its closest competitor, ACI is smaller but it is priced better relative to its earnings, coming in with a P/E of 18.97 compared to ANR's 41.45. Israel Englander's Millennium Management likes ACI.
Kinder Morgan, Inc. (NYSE:KMI) is an oil and gas pipelines company with a $23.21 billion market cap. KMI pays a 3.66% dividend yield. The company's EPS is expected to grow 26.06% per annum over the next five years. It recently traded at $32.83 a share. Analysts predict KMI could reach $36.00 a share within the next year. Looking at its industry, KMI has much stronger earnings growth estimates (26.06% vs. its industry's 9.69%) and is priced lower - KMI has a P/E ratio of 35.68, versus its industry's 53.05.
Marathon Petroleum Corp. (NYSE:MPC) is an oil and gas refining company with a $12.64 billion market cap. MPC pays a 2.82% dividend yield. The company's EPS is expected to grow 37.00% per annum over the next five years. It recently traded at $35.46 a share. MPC has a one-year target estimate of $45.42 and has much stronger expectations than its industry. Analysts predict MPC will have stronger earnings growth than its industry at large - MPC's industry has an earnings growth estimate of 15.91% per annum over the next five years, roughly half that of MPC. MPC is also priced much lower relative to its earnings. MPC has a 5.16 P/E ratio compared to its industry's 12.67.
The Washington Post Company (WPO) is a newspaper and education services company with a $2.99 billion market cap. WPO pays a 2.43% dividend yield. The company's EPS is expected to grow 29.40% per annum over the next five years. It recently traded at $387.50 a share. WPO is more than twice the size of rival New York Times (NYSE:NYT), with its market cap of just $1.19 billion, and it has exponentially higher net income ($123.99 million vs. NYT's -$31.48 million). Warren Buffett's Berkshire Hathaway likes WPO.
Weingarten Realty Investors (NYSE:WRI) is a retail real-estate investment trust (REIT) with a $2.85 billion market cap. WRI pays a 4.77% dividend yield. The company's EPS is expected to grow 28.35% per annum over the next five years. It recently traded at $23.04 a share. Analysts say WRI could trade as high as $29.00 in the next year. WRI is a top pick for Ken Griffin's Citadel Investment Group.
Disclosure: I am long NYT.