Seeking Alpha
, Portfolio123 (2,143 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

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 profitable growth companies that pay rich dividends and that raise their payouts significantly each year. I also looked for companies where the average analysts' recommendation is a buy or better. 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. The stock is included in the Russell 3000 index. Russell Investment explanation:

The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investible U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.

2. Earnings growth estimates for the next 5 years (per annum) is greater than 10%.

3. Dividend yield is greater than 3.0%.

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

5. Average analyst recommendations are bullish (less than 2).

After running this screen on November 10, 2012, I obtained as results the 5 following stocks:

Cinemark Holdings Inc. (NYSE:CNK)

Cinemark Holdings, Inc., together with its subsidiaries, engages in motion picture exhibition business.

Cinemark Holdings has a low forward P/E of 14.84 and a PEG ratio of 1.73. The average annual earnings growth estimates for the next 5 years is 10.83%. The forward annual dividend yield is very high at 3.25% and the payout ratio is 60.9%. Among the nineteen analysts covering the stock, three rate it a strong buy, ten rate it a buy and six rate it a hold. On November 06, the company reported its 3Q financial results, Cinemark beat expectations on revenues and beat expectations on earnings per share. The CNK stock looks quite attractive.

Chart: finviz.com

Energy Transfer Equity, L.P. (NYSE:ETE)

Energy Transfer Equity, L.P. owns and operates a diversified portfolio of energy assets in the natural gas, natural gas liquids and propane sectors in the United States.

Energy Transfer has a forward P/E of 18.64 and a PEG ratio of 1.52. The average annual earnings growth estimates for the next 5 years is very high at 18.30%. The forward annual dividend yield is very high at 5.56%. Among the nine analysts covering the stock, two rate it a strong buy, six rate it a buy and only one rates it a hold. On November 07, Energy Transfer reported its 3Q financial results. On that occasion, the company said that distributable cash flow, as adjusted, for Energy Transfer Equity was $189.2 million for the three months ended September 30, 2012, an increase of $62.9 million over the three months ended September 30, 2011. All these factors make the stock quite attractive.

Chart: finviz.com

Houston Wire & Cable Company (NASDAQ:HWCC)

Houston Wire & Cable Company, through its subsidiaries, provides wire and cable products, and related services in the United States.

Houston Wire & Cable has a very low trailing P/E of 11.92 and a very low forward P/E of 9.46, the PEG ratio is also very low at 0.79. The price to sales ratio is very low at 0.51 and the average annual earnings growth estimates for the next 5 years is quite high at 15%. The forward annual dividend yield is very high at 3.28% and the payout ratio is only 39.1%. The company is trading 26.8% below its 52-week high and has 31% upside potential based on the consensus mean target price of $14.33. Among the four analysts covering the stock, two rate it a strong buy, one rates it a buy and one rates it a hold. The very low multiples and the very high dividend yield make the stock quite attractive.

Chart: finviz.com

Targa Resources Partners LP (NYSE:NGLS)

Targa Resources Partners LP provides midstream natural gas and natural gas liquid services in the United States.

Targa Resources Partners has a very low price to sales ratio of 0.59 and the average annual earnings growth estimates for the next 5 years is 10.4%. The forward annual dividend yield is very high at 6.50%. Among the fifteen analysts covering the stock, four rate it a strong buy, seven rate it a buy and four rate it a hold. On November 01, Targa Resources Partners reported its 3Q financial results. On that occasion, Joe Bob Perkins, CEO of Targa Resources said:

The 8% increase in third quarter Adjusted EBITDA compared to last year, despite a lower commodity price environment and the hurricane impact, demonstrates the strength of industry fundamentals, the diversity of our businesses and the benefits of the growth projects that we have placed in service over the last year.

The NGLS stock looks quite attractive.

Chart: finviz.com

Williams Companies, Inc. (NYSE:WMB)

The Williams Companies, Inc. operates as an energy infrastructure company in the United States.

Williams Companies has a forward P/E of 24.30 and the average annual earnings growth estimates for the next 5 years is 12.90%. The forward annual dividend yield is very high at 3.90%. The company is trading 14.6% below its 52-week high and has 18% upside potential based on the consensus mean target price of $37.83. Among the fifteen analysts covering the stock, four rate it a strong buy, nine rate it a buy and two rate it a hold. On October 31, Williams Companies reported its 3Q financial results. On that occasion, Alan Armstrong, Williams' president and chief executive officer, made the following comments:

We continued to see the expected growth in Williams Partners' fee-based business in the third quarter, but it was offset by continued unfavorable commodity prices and significant downtime in the Gulf Coast assets due to Hurricane Isaac's impact on company owned and adjacent facilities. We are reaffirming our extraordinary dividend growth rate of 55 percent in 2012, followed by 20 percent growth rate in 2013 and 2014, despite the unfavorable near-term commodity price environment.

All these factors make the stock quite attractive.

Chart: finviz.com

Source: 5 High Yielding Dividend Stocks Analysts Recommend