5 Great Dividend Stocks: Solid Yields And Double Digit Yearly Returns For A Decade

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Includes: D, ED, MO, NNN, STR, UHT
by: Stan Stafford

Summary

Each stock in this article yields a dividend greater than 3%.

Each stock in this article has provided average double digit annual returns over the past decade.

I believe that four of the reviewed stocks are current solid investment opportunities for long term dividend investors.

Overview

For dividend investors, its nice to have stocks that offer attractive yields, but it is also important to select stocks that do not lose value over the course of time. Stocks that lose value are more likely to cut or suspend dividends in the future, and a loss of price appreciation can really affect the overall performance of a portfolio. The stocks I'm going to review in this article offer solid yields (3% or better) and have averaged double digit returns over the past decade.

The stocks include:

  • Altria (NYSE:MO)
  • Consolidated Edison (NYSE:ED)
  • National Retail Properties (NYSE:NNN)
  • Questar (NYSE:STR)
  • Dominion Resources (NYSE:D)
  • Universal Health Realty (NYSE:UHT)

Altria

Altria currently offers a dividend yield of 3.44%. Over the past five years, Altria's dividend has grown by 48.68%. Over the past decade, Altria has averaged a 20.84% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in Altria would currently be worth $66,390 today with dividends reinvested. While there is no guarantee that this trend will continue over the next decade, signs do point in the right direction for this stock.

For its most recent quarter, the company beat both revenue and earnings estimates with a 6% increase in revenue and an increase in earnings per share from $0.63 to $0.72 compared to the same period last year. The company has estimated its full year 2016 earnings to grow in the7% to 9% range. Altria continues to reward shareholders not with a strong dividend but also with significant share buybacks.

As of March 31, 2016, Altria had approximately $797 million remaining in the current $1 billion share repurchase program, which it expects to complete by the end of 2016.

Although Altria does seem a bit overpriced based on historical perspectives, I believe that its strong growth validates the current price.

MO PE Ratio (<a href=

MO PE Ratio (NYSE:TTM) data by YCharts

I'm not alone with this opinion as the stock was recently upgraded to a buy by Argus with a price target of $68.

Consolidated Edison

Consolidated Edison currently offers a dividend yield of 3.56%. Over the past five years, Consolidated Edison's dividend has grown by 11.67%. Over the past decade, Consolidated Edison has averaged a 10.79% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in Consolidated Edison would currently be worth $27,861 today with dividends reinvested. Not as impressive as Altria, but still solid returns for a lower risk dividend player that continues to perform well.

For its latest quarter, Consolidated Edison reported a drop in earnings per share from $1.25 to $1.18 compared to the same period last year. This was somewhat expected due to the warmer weather conditions experienced throughout much of its market. ED recently announced a public share offering of 8,800,000. With the current price of the stock, this appears an appropriate time for such an offering.

Similar to Altria, Consolidated Edison at first glance does appear slightly overvalued based on historical trends but at a far lesser degree compared to Altria.

ED PE Ratio Chart

ED PE Ratio (TTM) data by YCharts

I believe the stock remains a buy worthy option at its current price considering its impressive history of dividend growth, high yield, and long term trend of increased stock price appreciation.

ED Chart

ED data by YCharts

National Retail Properties

National Retail Properties currently offers a dividend yield of 3.70%. Over the past five years, National Retail's dividend has grown by 12.99%. Over the past decade, National Retail Properties has averaged a 15.55% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in National Retail Properties would currently be worth $42,432 today with dividends reinvested.

For its last quarter, the company saw a 9.3% increase in revenue and a 5.6% increase in FFO per share compared to the same period last year. Based on the positive results, the company boosted its full year FFO guidance to $2.31 to 2.36 per share compared to the original guidance of $2.29 to 3.35 per share. With a continued high occupancy rate, I don't see any reason to assume National Retail will not continue to perform well moving forward. The main issue with the stock right now is that it is just below its 52-week high and appears somewhat overvalued based on its growth rate. However, when looking at the historical trend, its current price doesn't seem to be too far off based on a fair valuation.

NNN PE Ratio Chart

NNN PE Ratio (TTM) data by YCharts

Questar

Questar currently offers a dividend yield of 3.37%. Over the past five years, Questar's dividend has grown by 44.26%. Over the past decade, Questar has averaged a 10.03% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in Questar would currently be worth $26,008 today with dividends reinvested. This is the lowest return out of the five stocks in this article, but still impressive.

For its last quarter, Questar missed revenue/earnings estimates but still displayed a 6.5% increase in revenue and an increase in earnings per share from $0.48 to $0.50 compared to the same period last year.

Questar would be great long term option for investors if it wasn't for the upcoming merger with Dominion Resources later this year.

Because of the pending acquisition, lets take a look at Dominion Resources and see how it ranks as a dividend investment with a solid history of returns.

Dominion Resources currently offers a dividend yield of 3.66%. Over the past five years, its dividend has grown by 42.13%. Over the past decade, Dominion Resources has averaged a 11.39% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in Questar would currently be worth $29,407 today with dividends reinvested, making it a slightly better investment than Consolidated Edison during the same time period.

Overall, Dominion Resources seems like a solid investment opportunity, but personally I would like to see how the Questar acquisition affects the bottom line, along with the announced public offering of over 10M shares of stock. Combined with its steady decline in revenue over the past year and I consider Dominion Resources more of a hold at the moment.

D Revenue Chart

D Revenue (TTM) data by YCharts

Universal Health Realty

Universal Health Realty currently offers a dividend yield of 4.64%. Over the past five years, Universal Health Realty's dividend has grown by 6.61%. Over the past decade, Universal Health Realty has averaged a 12.87% annual total return (with dividends reinvested), which means that an initial investment of $10,000 a decade ago in National Retail Properties would currently be worth $33,557 today with dividends reinvested.

For its most recent quarter, the company reported flat revenue growth and an increase in earnings per share from $0.28 to $0.34 compared to the same period last year. Within that quarter, the company completed an acquisition that should help its long term growth trend:

In March, 2016, we purchased the Madison Professional Office Building located in Madison, Alabama for approximately $10.1 million. This multi-tenant property consists of approximately 30,100 rentable square feet and is fully occupied with an average remaining lease term of approximately six years at the time of acquisition.

Universal Health Realty appears fairly valued based on historical perspectives.

UHT PE Ratio Chart

UHT PE Ratio (TTM) data by YCharts

And while revenue growth was flat for its most recent quarter, the overall growth of revenue over the past five years has been impressive.

UHT Revenue Chart

UHT Revenue (TTM) data by YCharts

I believe the short-term stall of revenue growth will be short-lived and fully expect UHT to continue to deliver strong results for long term investors.

Conclusion

In this article I looked at 5 stocks that have delivered double digit annual returns over the past decade along with solid, growing dividends. The one stock I couldn't recommend buying was Questar due to its pending acquisition by Dominion Resources. Because of that merger, I looked at Dominions Resources to see if I felt it was currently a solid buy. However, questions regarding the upcoming merger along with a large, steady decline in revenue over the past ten years leave me considering the stock more of a hold at this point.

The other four stocks (Altria, Consolidated Edison, National Retail Properties, and Universal Health Realty) I believe are solid long term buy opportunities for dividend investors. It is difficult to find quality stocks at a discount and while these four stocks are not on sale, they are fairly valued in my opinion. While some investors will certainly want to wait for a better entry position to purchase these, I believe that their current price warrants long term interest. Often times, I have seen many investors miss out on quality stocks as they wait for a sale and instead only continue to see the price of these stocks continue to climb. As always, I suggest individual investors perform their own research before making any investment decisions.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.