Dividend stocks still have a few more great months ahead with some end of year profits laying on the table for those who want to pick them up. As I wrote in this article, I expect the remainder of September and early October to have a mild correction. Mid-October should be a perfect time to pick up some good stocks before the typical holiday rally sends dividend stocks higher. Now is the time to identify your target stocks. Here are some to think about.
I looked at a screen of dividends above 3.75% and a payout ratio below 50% while within 15% of the top end of their 52-week range trading range. From that list I picked a mixed bag of stocks that looked like they should end up higher by the end of the year, but may retreat within the next 2-3 weeks to allow for a buying opportunity. These were Hasbro (HAS), Conoco Phillips (COP), Astra Zeneca (AZN), Textainer Group (TGH), Lockheed Martin (LMT) and Rogers Communication (RCI).
Their dividends have looked like this (click to enlarge images):
Toy and game maker Hasbro has finally turned up in the later half of 2012 after share process suffered a long slide since the end of 2010. It currently trades around $38 off a 52-week range of $31.36-$39.98. It has a PE of 14.4 off earnings per share of $2.63. It pays a dividend of $0.36/quarter for a yield of 3.79%. The payout ratio is easily sustainable at 48%, especially with management's sweet 24.47% return on equity.
Hasbro does look to be overbought right now and should pull back over the next few weeks. However, it has a history of being a reliable dividend payer. With earnings growing, as well as the typical election year upside of November-December, Hasbro will be a good buy after its next price dip.
Meanwhile the international energy producer Conoco (which I hold in my portfolio) has a share price of $57.36 (as of the close on 21 September 2012) within a 52-week trading range of $50.62-$78.29 (although, as a side note, that trading range is skewed due to its spinoff of Phillips 66 (PSX) earlier this year; since its May spinoff went into effect the trading range actually has been $50.62-$58.90). It has a payout ratio of 49%.
Conoco Phillips currently pays a $0.66 quarterly payout for a yield of 4.60%. The earnings per share of $5.18 leads to a current PE of 11.1 (which closely mirrors the industry average PE of 11). The return on equity is a tame 11.65%
When Conoco split off it refining and other midstream assets, market watchers assumed Phillips would languish, as refiners are traditionally investment heavy hogs with razor thin margins. Instead, Conoco has been slow at seeing much benefit from the split.
It is still an extremely strong dividend payer. ROE and earnings should rise over the next three quarters and drive shares higher.
AstraZeneca is a global biopharmaceutical company. It has a recent price at $47.96 and a 52-week trading range of $39.72-$49.925. It pays a semi-annual dividend of $0.90 for a yield of $5.94% off a 44.5% payout ratio.
It shows an earnings per share of $6.24 for a PE of 7.7. It has shown a dazzling return on equity of 36%, 5-year dividend growth of 10.24% and is sitting on a cash hoard of $7.31 per share.
AstraZeneca has had a few troubled months; in particular it has had three CEOs in the last year. However the problems seem settled, while a strong research pipeline promises a series of new drug releases in the future. AstraZeneca may be a great stock to pick up even if there is no correction the next few weeks.
Is a holding company that operates a fleet of 1.6 million marine cargo carriers. The company's share price was at $31.15 in the upper reaches of its $19.55-$39.3495 year range. The PE ratio is 7.9 and offers a juicy 5.39% dividend yield off the $0.42 quarterly dividend that it distributes off a 36.4% payout ratio.
Textainer just closed on a 7 million share secondary public offering, which has driven the stock down from its high of just two weeks ago. Earnings are ramping up quickly. Global economics are aiding Textainer and its competitors. With financing strained and international trade compressed more and more, shipping companies are moving away from owning their shipping containers. Instead they are leasing containers from companies like Textainer.
It is too close to the end of the secondary offering to know if Textainer will follow my expectations of their movement pattern of the other companies in this screen: a near term pullback followed by an end-of year rally. However rising earnings and dividends should propel this stock higher by the end of the year in any case.
This global security and aerospace company has a stock price of $91.29 just off the top of its 52-week range of $70.37-$93.99. Earnings per share $8.54 for a PE of 10.7. The $1.00 quarterly dividend returns a yield of 4.38% off a 43.8% payout ratio.
Dividend growth is the story at Lockheed. In 2011 Lockheed raised dividends 33% and has a total 5 yr dividend growth rate of 21.06%. I expect the board to raise dividends again by the end of 2012.
However the fly in the ointment are delays in Lockheed's development of the F-35. Problems with subcontractors have delayed Pentagon approval for trials. This could cause a much larger hit in share price within the next few weeks. This should be temporary since the problem should not effect dividends or revenues in the near future.
Rogers Communication is a Canadian communications, media and sports company, including a number of television and cable businesses, sports stadiums and Canadian professional sports franchises, such as Major League Baseball's Toronto Blue Jays. The company recently closed at $40.57 and has a 52-week price range of $$32.27-$42.26. It has a quarterly dividend (US dollar equivalent) of $0.4046 for a yield of 3.99%. The payout ratio is 49.5%
Rogers' return on equity is a monstrous 43.11% and cash flow, earnings, margins and about any other positive metric you can name has been up in 2012.
The downer here is that Rodgers also owns the NHL team Toronto Maple Leafs, and will be losing revenues due to the ongoing labor strife. However, with other divisions charging along it should cause only a minor irritation.
In the end, all of these dividend payers should be higher come New Year's Eve. I expect the remainder of September and early October to have a mild correction. Mid-October should be a perfect time to pick up some good stocks before the typical holiday rally sends dividend stocks higher. Now is the time to identify your target stocks and these might be good ones to start with.
What do you think?