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Looking for profitable dividend stocks for your portfolio? We created a stock list with this in mind.

We began with a universe of dividend stocks, with market caps above $300 million, paying yields above 1% and with sustainable payout ratios below 50%.

To refine the list, we collected data on annual financial statements, and only focused on companies that have reported rising gross profit margins over the last four years (based on annual filings). For each stock, we describe the relevant time interval and change in gross margin.

Over 100 names made the cut. To narrow our list further we then screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

For an interactive version of this chart, click on the image below. (click to enlarge)

Tool provided by Kapitall (kapitall.com).

Do you think these stocks pay reliable dividends? Do you think these companies will continue to outperform like hedge funds expect? Use this list as a starting point for your own analysis. List Average 1-Year Return: 13%.

1. Casey's General Stores Inc. (NASDAQ:CASY): Operates convenience stores under the names of 'Casey's General Store', 'HandiMart' and 'Just Diesel' in the Midwestern states. Market cap at $1.95B, most recent closing price at $50.94.

Diluted normalized EPS increased from 1.68 to 2.29 during the first time interval (12 months ending 2010-04-30 vs. 12 months ending 2009-04-30). For the second time interval, diluted normalized EPS increased from 2.29 to 2.39 (12 months ending 2011-04-30 vs. 12 months ending 2010-04-30). And for the last time interval, the EPS increased from 2.39 to 3.05 (12 months ending 2012-04-30 vs. 12 months ending 2011-04-30).

Dividend yield at 1.3%. Payout ratio at 20.15%. Net institutional purchases in the current quarter at 2.0M shares, which represents about 5.26% of the company's float of 38.03M shares.

2. Monro Muffler Brake Inc. (NASDAQ:MNRO): Provides automotive undercar repair and tire services in the United States. Market cap at $1.05B, most recent closing price at $33.92.

Diluted normalized EPS increased from 0.78 to 1.09 during the first time interval (52 weeks ending 2010-03-27 vs. 53 weeks ending 2009-03-28). For the second time interval, diluted normalized EPS increased from 1.09 to 1.45 (52 weeks ending 2011-03-26 vs. 52 weeks ending 2010-03-27). And for the last time interval, the EPS increased from 1.45 to 1.69 (52 weeks ending 2012-03-31 vs. 52 weeks ending 2011-03-26).

Dividend yield at 1.18%. Payout ratio at 22.61%. Net institutional purchases in the current quarter at 1.6M shares, which represents about 5.5% of the company's float of 29.09M shares.

3. National Research Corp. (NRCI): Provides performance measurement and improvement services, healthcare analytics, and governance education to the healthcare industry in the United States and Canada. Market cap at $343.06M, most recent closing price at $50.45.

Diluted normalized EPS increased from 1.09 to 1.26 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, diluted normalized EPS increased from 1.26 to 1.33 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the last time interval, the EPS increased from 1.33 to 1.69 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Dividend yield at 2.06%. Payout ratio at 47.82%. Net institutional purchases in the current quarter at 141.4K shares, which represents about 5.75% of the company's float of 2.46M shares.

4. Sturm, Ruger & Co. Inc. (NYSE:RGR): Engages in the design, manufacture, and sale of firearms in the United States. Market cap at $873.31M, most recent closing price at $45.58.

Diluted normalized EPS increased from 0.41 to 1.47 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, diluted normalized EPS increased from 1.47 to 1.48 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the last time interval, the EPS increased from 1.48 to 2.08 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Dividend yield at 2.31%. Payout ratio at 28.6%. Net institutional purchases in the current quarter at 2.3M shares, which represents about 13.15% of the company's float of 17.49M shares.

5. Silvercorp Metals Inc. (NYSE:SVM): Engages in the acquisition, exploration, development, and operation of silver mineral properties in China and Canada. Market cap at $1.01B, most recent closing price at $5.93.

Diluted normalized EPS increased from 0.12 to 0.23 during the first time interval (12 months ending 2010-03-31 vs. 12 months ending 2009-03-31). For the second time interval, diluted normalized EPS increased from 0.23 to 0.4 (12 months ending 2011-03-31 vs. 12 months ending 2010-03-31). And for the last time interval, the EPS increased from 0.4 to 0.43 (12 months ending 2012-03-31 vs. 12 months ending 2011-03-31).

Dividend yield at 1.72%. Payout ratio at 30.03%. Net institutional purchases in the current quarter at 10.8M shares, which represents about 6.54% of the company's float of 165.07M shares.

6. United Financial Bancorp (NASDAQ:UBNK): Operates as a holding company for United Bank that provides various banking products and services in Massachusetts. Market cap at $234.51M, most recent closing price at $15.11.

Diluted normalized EPS increased from 0.49 to 0.49 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, diluted normalized EPS increased from 0.49 to 0.71 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the last time interval, the EPS increased from 0.71 to 0.74 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Dividend yield at 2.65%. Payout ratio at 45.27%. Net institutional purchases in the current quarter at 991.0K shares, which represents about 7.46% of the company's float of 13.29M shares.

*EPS data sourced from Yahoo! Finance, institutional buying data from Fidelity, all other data sourced from Finviz.

Disclaimer: Kapitall is a team of analysts. This article was written by Rebecca Lipman, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: Increasingly Profitable Dividend Stocks That Hedge Fund Are Buying