In this 2 part article, I will list what I believe are 10 of the best dividend paying stocks in the market. The criteria I use matches reasonably priced stocks along with a high % dividend yield plus stock price stability and appreciation potential, translating into higher investor equity. In certain cases, stocks with very low prices and higher beta are considered for the list because of the potential for investors to load up a lot more shares before the ex-dividend cut off date, albeit these are a much riskier dividend play.
Seadrill Limited (SDRL) 2/10/11 pps: $39.51. Dividend yield: 7.69% Dividend type: Cash annualized dividend: $3.04 per share, $0.76 last quarter. Next Ex-dividend date: Not yet announced: Expected some time in March. The company has roughly $496 million in cash on hand, and an operating Cash Flow of 1.76 billion dollars.
Seadrill is an offshore drilling contractor that provides offshore drilling services to the oil and gas industries worldwide. It also offers platform drilling, well intervention, and engineering services. The company currently has 44 multi-purpose operational offshore drilling rigs with at least 10 more multi-purpose rigs being constructed and/or close to completion.
Seadrill is definitely my favorite dividend paying stock. I trade in and out of this stock on a regular basis for my family account. I have been holding our current position since the stock was $34.11 a share. The stock pays a cash dividend of 7.69% that comes out to roughly 3 dollars a share, paid in quarterly installments. The next anticipated Ex-Dividend date is in early March.
Seadrill is a fast growing cash flow generating company, with 24 ultra-deepwater rigs in operation and another five under construction. In my strong opinion, Seadrill is poised to be a major player in deep water drilling for some time to come. Commodities such as oil are still on the rise, and this factor is in part reflected in their rapidly rising stock price which just recently hit a new 52 week high on 2/10/11. Seadrill has a high beta of 1.91, which is to be expected with a stock that is channeled with the price of crude oil. If you play this one right, you can make a good amount of money with it.
Transocean Ltd. (RIG) 2/10/11 pps: $50.21. Dividend yield: 6.29% Dividend type: Cash annualized dividend: $3.16 per share, $0.79 last quarter. Next Ex-dividend date: 2/22/2012 Record date: 2/24/2012 Pay date: 3/21/12. The company has roughly $3.29 billion in cash on hand, and an operating Cash Flow of 2.02 billion dollars.
Transocean provides offshore contract drilling services for oil and gas wells worldwide. It offers deep water and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. As of February 10, 2011, the company owned, had partial ownership interests in, and operated 138 mobile offshore drilling units.
Transocean reported in Q3 2011, revenue fell to $2.24 billion, from $2.33 billion in the prior quarter. The company blamed the need to comply with new regulations and standards as the reason for the drop in revenue. Net loss fell to $71 million, including $81 million in special items, compared to a profit of $155 million last quarter.
The news above certainly did not stop Transocean from rallying from the high $30 range to the current pps of over $50. A mentioned prior, commodities such as oil are still on the rise, so I expect these oil related dividend paying stocks to continue to rise slowly, with occasional pull-backs. Look for an entry point on days where the price of oil is down along with the market, for a nice beginning cost basis. Transocean, like Seadrill, has a higher beta of 1.21 for the same reasons Seadrill does; oil prices.
Bristol-Myers Squibb Co. (BMY) 2/10/11 pps: $31.90. Dividend yield: 4.26% Dividend type: Cash annualized dividend: $1.36 per share, $0.34 last quarter. Next Ex-dividend date: Not announced, expected in April. The company has roughly 6.20 billion in cash on hand, and net sales of 5.5 billion dollars as of fiscal year end 2011.
Bristol has been paying consistent dividends going back to 1979. While the dividend % is not particularly high here, the stock price is attractive for a nice safer leverage play closer to the ex-dividend date. In a prior article of mine, I remarked about Bristol buying out Inhibitex (NASDAQ:INHX), a rival in a possible $20 billion hepatitis C market, for $2.5 billion in cash. I believe this puts Bristol in a very good position to compete in the hep c drug market in the future, which should translate to a higher stock price and stronger cash flow revenue over time. Bristol has a very low beta of 0.38, making for a stable stock price.
Eli Lilly (LLY) 2/10/11 pps: $39.31. Dividend yield: 4.99% Dividend type: Cash annualized dividend: $1.96 per share, $0.49 last quarter, $0.49 announced for this quarter. Next Ex-dividend date: 2/13/2012. Record Date: 2/15/2012. Pay Date: 3/9/2012. The company has roughly 6.80 billion in cash on hand.
Eli Lilly develops, manufactures, and sells pharmaceutical products worldwide.
As I remarked in a prior article, in order to receive a quarterly dividend payment, you must buy the stock no later than before the close of the market one business day before the ex-dividend date. Because the ex-dividend date here is 2/13/12, you will have to wait until the next ex-dividend date to receive a quarterly payment if you have not bought the stock on, or prior to 2/10/12.
LLY has a P/E ratio of 9.43 and a forward P/E ratio of 12.23., which makes for an attractive multiple, coming in under 15. It has a lower beta, making for a more stable stock price. LLY's patent on Zyprexa has recently expired, along with more patents expiring soon for some of their other branded drugs.
This is an expected normal occurrence for big pharmas, but this year has seen, and will see, more of them lose patents to expiration. This is pretty much rinse, lather, repeat, as many of these large pharmas have strong R&D as a hedge to these patent losses. This is also a major factor in smaller pharmas being targeted for acquisition for their drug pipeline by large pharmas such as LLY, Bristol Meyers Squibb and others. Eli Lilly has a lower beta of 0.62, making for a stable stock price.
Eli Lilly has been paying out a dividend since 1982.
Pfizer (PFE) 2/10/11 pps: $21.05. Dividend yield: 4.18% Dividend type: Cash annualized dividend: $0.88 per share, $0.22 last quarter. Next Ex-dividend date: Not announced, expected in May. The company has roughly 29.98 Billion dollars in cash on hand.
Pfizer offers prescription medicines for humans and animals worldwide, and offers the same in the OTC market. There really is not a whole lot of exciting stuff going on with Pfizer these days, although they did gain FDA approval in Dec. 2011 for a promising new RA (Rheumatoid Arthritis) drug, Tofacitinib, used to treat RA patients who do not respond well to MTX (Methotrexate). Pfizer is a long time dividend payer, paying them out since 1982. The beta is 0.77, which reflects a relatively stable pps. While the current dividend yield is certainly not great, the pps allows for a nice leverage possibility for many investors looking to pick up a quick quarterly pay-out. Because of these factors, Pfizer makes the list.
Disclosure: I am long SDRL.
Additional disclosure: This article is intended for informational and entertainment use only and should not be construed as professional investment advice. Always do you own complete due diligence before buying and selling any stock.