By Larry Gellar
We've identified 5 high-dividend stocks that can help investors bring in additional retirement income. Bristol-Myers Squibb (NYSE:BMY) and GlaxoSmithKline (NYSE:GSK) are two terrific pharmaceutical companies. Meanwhile, Sempra (NYSE:SRE), Sonoco (NYSE:SON), and Seagate (NASDAQ:STX) operate in other lucrative sectors. Let's see what's been happening with these 5 stocks:
Sonoco Products Co. has a dividend yield of 3.50%. That yield has actually been boosted by a sharp decrease in the stock price due to a recent announcement from Sonoco. Indeed, the company has said that lower demand will hurt earnings for the fourth quarter, although cost-cutting initiatives are on the way. One such move is to decrease the number of divisions in the company now that it has acquired Tegrant Corp. More information about that transaction can be found here, and Tegrant is a big player in the market for retail security packaging. On the other hand, tube and core volume has fallen somewhat, and that trend will need to be reversed for the company to get back on track. We think Sonoco will be able to keep up its dividends, however, and dividends may even be increased as the economy improves. Important competitors for Sonoco include Bemis (NYSE:BMS) and Rock-Tenn (RKT). Sonoco offers the lowest price-to-earnings ratio (14.72) out of those stocks, and that alone helps to make it an attractive pick. Operating cash flows have also been good for Sonoco - $375.14 million came in during 2010 and $131.91 million came in during the first 3 quarters of 2011.
Bristol-Myers Squibb Company has a dividend yield of 4.20%. Like Sonoco, the stock's dividend has been boosted by a decline in the stock price. The news here is that Bristol-Myers Squibb and AstraZeneca's (NYSE:AZN) newest diabetes drug has hit a stumbling block at the FDA. That agency is requesting more data on the treatment, and many industry analysts are questioning how much money the drug can make in the first place. After all, Dapagliflozin will be competing with a variety of other diabetes treatments. Additionally, the way the drug works has many regulators concerned. Because it causes more sugar to flow in the body's urine, Dapagliflozin may not be terrific for those with kidney problems. Regardless, we wouldn't be surprised if minor adjustments to Dapagliflozin could be made to solve that issue. In fact, investors can profit by buying Bristol-Myers now while it's suffered a pullback from this bad news. Investors who do purchase BMY stock will be paying a 2.65 price to sales ratio but that's not unreasonable considering the company's strong margins. Those numbers are 73.41% gross and 33.04% operating. As for cash flow, Bristol-Myers had approximately $4 billion of free cash flow in 2010 and approximately $3 billion of free cash flow in the first 3 quarters of 2011. Clearly, this company is financially healthy.
Sempra Energy has a dividend yield of 3.50%. The stock has been slowly rising since November, and this company has a number of good things going for it. San Diego Gas & Electric (owned by Sempra Energy) just unveiled its Energy Innovation Center, a resource that will benefit its customers. More importantly, though, San Diego Gas & Electric is working on a variety of new solar solutions. Here's what SDG&E's James Avery recently said, "Our proposal would expand solar access to all of our customers and also open up a new potential market for solar developers. With the addition of more clean solar energy, our communities, the environment and our region will benefit." Additionally, Sempra is making investments in wind energy through BP (NYSE:BP). We like Sempra because its commitment to green energy will ensure that dividends come through even in future decades when less clean methods of providing electricity are banned. Compared with Edison International (NYSE:EIX) and PG&E (NYSE:PCG), Sempra offers cheap price-to-earnings and price/earnings-to-growth ratios. Gross margin of 31.39% and operating margin of 17.26% are both better than its peers as well. With $802 million flowing into Sempra during 2010, this company has plenty of cash to pay out future dividends.
GlaxoSmithKline plc has a dividend yield of 4.80%. The stock has been rising the past couple of weeks, and the latest news for the company is the discontinuation of its partnership with Astex (NASDAQ:ASTX). The companies were working on new cancer treatments, but Astex has decided it would like to go in a different direction. GlaxoSmithKline still benefited from this move, though, because it was able to pay Astex a low price for the related research and assets. GlaxoSmithKline will certainly benefit in the future from this. GlaxoSmithKline has also been working with Theravance (THRX) on Renovair, which seeks to treat chronic obstructive pulmonary disease and asthma. While the latest results weren't terrific, we think they might still be good enough to get approval from regulators. Compared with Novartis (NYSE:NVS), Pfizer (NYSE:PFE), and Sanofi (NYSE:SNY), GlaxoSmithKline offers the lowest price/earnings-to-growth ratio (1.12). That's a testament to how inexpensive the stock is, and margins for GlaxoSmithKline are very strong as well (73.79% gross and 37.26% operating). With over $5 billion of free cash flow in 2010 and over $3 billion of free cash flow in the first 3 quarters of 2011, this company is very healthy financially. The company's efforts to buy back stock have also been impressive.
Seagate Technology PLC has a dividend yield of 3.70%. Despite trading for under $10 per share in October, STX shares are now selling for over $20 apiece. As described here, the company unveiled some exciting new technology at the Consumer Electronics Show in Las Vegas. For instance, Seagate is making improvements to its Satellite product line, which is a nifty piece of mobile storage. One key improvement is the ability to surf the Internet while connecting through WiFi to the Satellite. In fact, we think this will help to make the Satellite significantly more attractive to consumers. Seagate also showed off a new product that's in the works. It's essentially a Satellite with its own 4G connection, which is of course extremely useful for when working in a non-WiFi zone. The device will use Verzion's (NYSE:VZ) excellent LTE network, and a company called Poltek will provide a service that allows one's peers to access the storage part of the device. With a price/earnings-to-growth ratio (0.14) that's significantly lower than Fujitsu's (OTCPK:FJTSY) and Western Digital 's (NYSE:WDC), this stock is very attractively priced. Fujitsu had $414 million of cash flow come in during fiscal year 2011, so investors can certainly expect the dividends to keep on coming.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.