One of the greatest difficulties in any stable dividend portfolio is the ability to round out the corners with high-yielding companies that offer unique exposure to differentiating industries. Much too often a dividend portfolio may find itself knee-deep in MLPs, utility companies, telecommunication plays, and REITs to mention a few. But in every good holdings portfolio, the investor utilizes the safety of additional exposure to varying industrial sectors in order to mitigate the risk should one part of the economy suffer catastrophic failure.
The following companies offer five unique areas of additional exposure without sacrificing superior yield. These companies all have market capitalizations that exceed $1 billion, and each offers a dividend that exceeds 5% on an annualized basis. All values were taken as of March 30, 2012.
|Company Name||Forward Div%||Forward P/E||Industry|
|Vale S.A. (VALE)||5.0%||6.16||Mining|
|Gannett Co. (GCI)||5.3%||6.82||Media|
|Ship Finance Intl. (SFL)||7.8%||9.40||Shipping|
|R.R. Donnelley & Sons (RRD)||8.3%||6.86||Printing|
|Six Flags Entertainment (SIX)||5.1%||52.73||Theme Parks|
Vale: The company is Brazil's largest multinational mining corporations and operates in the diversified metals sector. As a producer of nickel, iron ore, manganese orge, aluminum, fertilizers, copper, and coal, Vale is a well-rounded player in multiple commodity markets. Having pledged a 50% increase in its minimum dividend for 2012, the company now sports a yield of 5% with a forward price-to-earnings ratio of 6.16. With operating cash flow of $23 billion, a payout ratio of 40% is sure to be sustainable with ease.
Gannett Co: As the media giant most well known for its publication of USA Today, the company has shown an encouraging recovery in its dividend policy. Having cut its yield from $0.40 to $0.04 as the Great Recession hit in 2009, the company has since doubled it to $0.08 last summer. In February, Gannett proceeded to raised it 150% to $0.20 per quarter allowing for the current yield of 5.3%. As the operator of 23 television stations, the publisher of 600 magazines, and the publisher of 82 daily newspapers, Gannett continues to reign as a media giant. With a feasible 13% payout ratio, there is little doubt that the company is capable of sustaining its yield if it so chooses.
Ship Finance International: The company is the owner of a multi-faceted shipping fleet ranging from VLCCs, to dry bulk shippers, to container ships, to offshore rigs, and even to chemical tankers. While shipping rates in certain sectors have plummeted to unsustainable levels, SFL continues to earn significant cash flows due to its strategy of long-term charters and stable income. With a declared $4.9 billion in "locked-in" EBITDA over an average charter term length of 10.8 years for its fleet, SFL is a safer investment than many might consider it to be. With a current yield of 7.8%, this $1.2 billion company can serve as a useful means to add shipping exposure to a given portfolio.
R.R. Donnelley & Sons Company: As a leader in print and print-related services, this company has served business since 1864. The industry continues to suffer a backlash from fears over digital media's ability to make print obsolete. Yet the truth is that the industry is more likely to just consolidate with the smaller firms being bought out by larger corporations at discounted prices. As it stands, the company trades with a forward price-to-earnings ratio of 6.86 and currently yields a steady 8.3% dividend.
Six Flags Entertainment: As the owner and operator of 19 regional theme, water, and zoological parks, Six Flags serves as a premiere entertainment manager with nationwide exposure. Having emerged from bankruptcy in 2010, the reformed entity was able to wipe out $1.7 billion of debt from a total of $2.7 billion. The result was the difference between night and day for this company with a $2.57 billion market capitalization. Since emerging from bankruptcy, the company has more than doubled its share price in less than two years. Additionally, it's expanded its share buyback program up to $250 million and most recently boosted its dividend by a factor of 10 times what it was. With a significant amount of cash coming in, the company now offers a respectable 5.1% dividend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.