In the age of financial repression yield is king. But what if you could get a good dividend yield and the comfort of knowing that company insiders are aggressively buying?
[Why does insider buying matter? Although insiders cannot trade on material non-public information, they understand a company's intricacies and, based on unquantifiable factors (management decision process, morale, etc.), often know if their company is undervalued by the market.]
To help readers identify such stocks, I ran a screen for companies with a dividend yield over 5% and a market cap over $2 billion. Next I ranked the stocks to highlight the five with the biggest change in insider transactions over the past six months. (By screening for these attributes, I can create a short list worthy of additional research.)
Here's what I came up with:
|(RRD)||R.R. Donnelley & Sons Company|
|(SIX)||Six Flags Entertainment Corporation|
|(SNH)||Senior Housing Properties Trust|
|(PVR)||Penn Virginia Resource Partners LP|
|(VLY)||Valley National Bancorp|
As you can see below, each of these stocks has recently received a lot of attention from company insiders:
At the same time, these companies are forking out dividend yields between 5.06% and 8.13%. At first glance, based on the payout ratio, the dividend yields at RRD and VLY appear most sustainable.
To look further back at the sustainability of each dividend policy, below I have charted all dividends paid by each company over the past five years.
|Ticker||Dividend Yield||Payout Ratio|
All five companies have paid fairly steady dividends over the past five years, except for SIX, which just started its dividend policy.
Upon initial inspection RRD and VLY stand out as good candidates for additional investigation. However, given the long-term dividend track record for SNH and PVR I believe a deeper look at the earnings potential for these companies is warranted. Especially given the heavy insider buying.
Disclaimer: Data sources: Finviz, Ycharts. This is not advice. While Plan B Economics makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.
Disclosure: I am long PVR.