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, Portfolio123 (1,636 clicks)
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According to the institutional research firm Ned Davis Research, over the last 36 years, dividend stocks have outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed those that don't pay dividends by nearly 8% every year. The numbers are even more impressive when looking at companies that consistently increase their dividends.

I have searched for very profitable companies that pay rich dividends and that raise their payouts significantly each year. I have elaborated a screening method which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all following demands:

1. Dividend yield is greater than 2.5%.

2. Annual rate of dividend growth over the past five years is greater than 15%.

3. The forward P/E is less than 12.

4. The PEG ratio is less than 1.20.

5. Price to Book Value is less than 1.50.

After running this screen on October 20, 2012, I obtained as results the 5 following stocks:

Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI)

Apollo Commercial Real Estate Finance is a commercial real estate finance company. Apollo Commercial has a very low forward P/E of 9.35 and a low PEG ratio of 1.08. The average annual earnings growth estimates for the next 5 years is 10% and the annual dividend yield is very high at 9.62%. Apollo stocks are selling at book value and considering the very high dividend yield, ARI stock looks quite attractive.

Chart: finviz.com

Cliffs Natural Resources Inc. (NYSE:CLF)

Cliffs Natural Resources is a mining and natural resources company, engaged in the production of iron ore pellets, fines and lump ore, and metallurgical coal. Cliffs Natural Resources has a very low trailing P/E of 4.44 and a very low forward P/E of 7.45. The PEG ratio is very low at 0.64 and the price to sales is also very low at 0.95. The forward annual dividend yield is very high at 5.62%. The company is trading 42.1% below its 52-week high and has 17.5% upside potential based on the consensus mean target price of $52.19 for the company. The Cliffs Natural's stock has shown recent upside momentum; the price crossed-over its 50 days simple moving average four days ago (intermediate-term momentum indicator) and the 10 day moving average crossed-over its 20 days simple moving average three days ago (short-term momentum indicator). All these factors make the stock quite attractive.

Chart: finviz.com

Cresud Sociedad (NASDAQ:CRESY)

Cresud Sociedad engages in the production of basic agricultural commodities in Brazil and other Latin American countries. Cresud Sociedad has a low forward P/E of 11.34 and a low PEG ratio of 1.10. The price to free cash flow is very low at 3.15 and the price to sales is also very low at 0.54. The company is trading 39.4% below its 52-week high and has 96% upside potential based on the consensus mean target price of $16.20 for the company. Cresud Sociedad stocks are selling below book value (P/B at 0.94) and considering the very high dividend yield of 3.65%, CRESY stock definitely looks very attractive.

Chart: finviz.com

Ensco plc (NYSE:ESV)

Ensco provides offshore contract drilling services to the oil and gas industry worldwide. Ensco has a very low forward P/E of 8.34 and a very low PEG ratio of 0.85. The average annual earnings growth estimates for the next 5 years is quite high at 15.43% and the forward annual dividend yield is quite high at 2.54%. The Ensco stock has shown recent upside momentum; the 10 days moving average crossed-over its 20 days simple moving average three days ago. All these factors make the stock quite attractive.

Chart: finviz.com

Safeway Inc. (NYSE:SWY)

Safeway Inc., together with its subsidiaries, operates as a food and drug retailer in North America. Safeway has a very low trailing P/E of 8.47 and a very low forward P/E of 7.82. The PEG ratio is very low at 0.88 and the price to sales is also very low at 0.09. The forward annual dividend yield is very high at 4.28%. Safeway's stock has shown recent upside momentum; the price crossed-over its 50 days simple moving average two days ago and the 10 days moving average crossed-over its 20 days simple moving average also two days ago. All these factors make the stock quite attractive.

Chart: finviz.com

Source: 5 High Yielding Dividend Stocks Increasing Dividends