Seeking Alpha
Dividend growth investing, independent research, long-term horizon
Profile| Send Message|
( followers)  

In the past two weeks, I reviewed the Dividend Aristocrats along with the Canadian Dividend Aristocrats. I wanted to know what they have been up to for the past 5 years. This gave me another idea: what about this year? Which dividend stocks are rocking since the beginning of the year? Back in March, I would have had a long list to go through since we had a booming start of the year. Since then, the market got cold and some best performing stocks went back to reality.

I pulled out 11 dividend stocks that are still up by more than 10% since January (as of May 2012). There are 6 US and 5 Canadian dividend stocks, with 7 out of 11 are coming from my (free!) Best Dividend Stock for 2012, not bad huh? They offer an average dividend yield of 3.77% with a YTD growth (without dividend) of 22.15% in average. In addition to pay you to wait, they are rocking the stock market like superstars.

There is always something tricky when you look back at what happened in the past: the past doesn't predict the future. While it is quite impressive to see a portfolio of 11 stocks surging stocks, you might ask yourself if they are going to continue to rock or has the easy money already gone. This is what we are going to do to today.

11 Surging Dividend Stocks in Numbers

Company

Ticker

Dividend Yield

YTD Return

P/E Ratio

Seagate Technology

STX

4.11%

48.48%

5.6

Hasbro

HAS

4.08%

10.72%

12.99

Microsoft

MSFT

2.72%

13.33%

10.7

Garmin

GRMN

3.69%

29.62%

16.49

Apple

AAPL

2.65%

42.94%

13.68

A&T

T

5.19%

12.09%

48.98

Magna International

MG - TSE

2.71%

21.85%

9.35

Corus Entertainment

CJR.B - TSE

4.05%

15.45%

12.81

CREIT

REF.UN - TSE

3.72%

13.08%

N/A

Boardwalk REIT

BEI.UN - TSE

3.12%

18.22%

N/A

Torstar

TS.B - TSE

5.38%

17.87%

3.37

Average

3.77%

22.15%

17.94

Overall Analysis

Before going into the details of each stock, I'd like to go with a few analyses on the overall portfolio.

  • Have you noticed that there are a lot of techno related stocks? (AAPL, MSFT, STX, GRMN and we can even consider T in this category)
  • P/E ratios go from as low as 3.37 to as high as 48.98 (there are a few stocks where the "ride" is probably over)
  • There are 2 Canadian REITs in this list (not bad for a supposedly "safe & stable" investment)
  • I wish I had these stocks 5 months ago! (disclaimer: I don't own any of them).

My Favorite Dividend Pick

If I had to pick 1 stock among this list, it would be Seagate Technology (NASDAQ:STX). The dividend yield is more than interesting (4.11%), the dividend payout ratio is more than reasonable (31.77%) and the P/E ratio is astounding (5.6!). Unless you think that the classic computer/laptop is going to fade away forever because we now have tablets, STX and WDC (Western Digital doesn't pay dividend though) will probably continue to surge until they reach a "normal" level of P/E.

Another great sign of vitality: STX announced back in January 2012 a $1G stock repurchase program. As of April 2012, the stock repurchase program went from $1 to 2.5G. They also boosted its dividend by 39% during the same period. While the hard drive industry (notably STX and WDC) were hit by the huge flood in Thailand, both companies have recovered from this event.

A Few More Great Picks

Among these 11 surging dividend stocks, I would be tempted to add a few more picks to my watch list. Starting with Microsoft (NASDAQ:MSFT), since it always finds a way to generate more growth. They are active in several fields and are always able to benefit from Windows and Office upgrades. Moving north into Canadian territory, I would consider Corus (OTCPK:CJREF), since it has constantly beat the analysts' expectations over the past 5 quarters.

The recent purchase of Astral Media by Bell (NYSE:BCE) repositioned Corus stocks to higher levels (Astral and Corus are the two main leaders in this industry). This industry is meant to generate great profits in 2012 considering their great specialized channel offering. Finally, I'm looking at Magna International (NYSE:MGA) with recent strong sales. With strong sales came strong profits and MG is expecting to continue its way in the auto part industry. Over the past few years, it has gained more contracts with manufacturers with great brands like Infiniti, Nissan and BMW.

Buying a Surging Stock at its Peak?

Yeah… this should be your main concern… especially when you look at AT&T or Apple. T is trading at huge P/E ratios and its payout ratio is out of norm (exceeding 100%!). Apple seems to continue to post strong results. On the other hand, nothing impresses investors anymore when it comes to AAPL; they all expect record after record. Can it continue on its crazy ride? Can AAPL reach $600 a share again? I'm tempted to say yes, but I'm not sure I would be willing to take the risk, would you?

Disclaimer: I do not hold any position of the above mentioned stocks but I'm seriously considering STX.

Source: 11 Surging Dividend Stocks That May Continue Their Ride