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Top 10 Income Stocks Near a 52-Week Low

|Includes:CALM, CHFC, HGIC, HHS, HTLF, SJW Corp. (SJW), SYY, TGT, WABC, WEYS
The market turned down this week which was possibly commodities driven.  As we've noted in our 2008 commentary and every since, when the Dow declines by more than 10%, gold and gold stocks fall by a greater magnitude.  We're not there yet, however the precious metals and the Dow are tracking each other very closely.  The S&P fell roughly 1.7% while the Dow dropped slightly less at 1.3%.  The beginning of May is looking like the old saying, "sell in May and go away."

 
Our watch list this week contains 25 companies that are within 11% of their 52-week low.  The complete list can be found here.

 
May 6, 2011 Watch List
Symbol Name Price % Yr Low P/E EPS (ttm) Dividend Yield Payout Ratio
SJW SJW Corp. 22.53 1.26% 17.33 1.30 0.69 3.06% 53%
WABC Westamerica BanCorp.  49.6 3.05% 15.60 3.18 1.44 2.90% 45%
CHFC Chemical Financial 19.47 3.62% 17.70 1.10 0.80 4.11% 73%
WEYS Weyco Group, Inc.  23.1 3.63% 19.41 1.19 0.64 2.77% 54%
TGT Target Corp. 50.51 4.73% 12.63 4.00 1.00 1.98% 25%
SYY Sysco Corp. 28.51 5.09% 14.70 1.94 1.04 3.65% 54%
HGIC Harleysville Group Inc.  31.87 5.15% 13.17 2.42 1.44 4.52% 60%
HHS Harte-Hanks, Inc. 8.89 5.58% 11.25 0.79 0.32 3.60% 41%
HTLF Heartland Financial 14.57 5.81% 13.62 1.07 0.40 2.75% 37%
CALM Cal-Maine Foods 27.76 5.83% 8.90 3.12 1.88 6.77% 60%

Watch List Summary

 
SJW Corp. or San Jose Water (NYSE:SJW) last appeared on our dividend watch list back on December 18, 2009. At that time, SJW was trading at $21.93 and had a P/E ratio of 24.42.  SJW is now trading with a P/E ratio of 17.7 and a dividend yield of 3.05% despite reflecting a higher absolute price. These numbers reflect that the company is able to consistently grow their earnings while increasing their dividends. After being on our list in December 2009, SJW rose above $27 and has steadily maintained a rising trend above $24 until recently.

 
Sysco Foods (NYSE:SYY) was last on our dividend watch list July 2009. At the time of our 2009 watch list, SYY was trading at $21.51 with a P/E ratio of 12 and a dividend yield of 4.40%.  Currently, Sysco (SYY) is trading at $28.45 and has a P/E ratio of 14. The annual dividend has increased by 8% since July 2009. Concerns about Sysco not being able to pass on the increase commodity prices is finally percolating down to the consumer as reflected in the recent Bloomberg article “Restaurants Lift Prices as Inflation Hawks See Fed Behind Curve.”

 
New addition to this list is Cal-Maine Foods (NASDAQ:CALM), a major egg producers.  We decided to track CALM after evaluating its dividend policy that was established in 2007.  Under CALM's guidelines, the company will pay out one-third (1/3) of quarterly income. Essentially, this mean they have tied their distribution to the profitability of the company.  As such, the 6.7% dividend yield may not hold.  However, we believe that this is a very prudent way to manage dividend payouts. The result is extraordinary and can be seen here. Shares of CALM have gained 16% since the implementation of this dividend policy.

 
Top Five Performance Review

 
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 7, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.
Symbol Name 2010 Price 2011 Price % change
MON Monsanto Co. 59.09 65.27 10.46%
HSC Harsco Corp. 26.38 34.29 29.98%
FRS Frisch's Restaurants, Inc 20.77 23.1 11.22%
SHEN Shenandoah Telecom 16.95 16.52 -2.54%
VIVO Meridian Bioscience Inc.  18.29 23.66 29.36%



Average 15.70%





DJI Dow Jones Industrial 10,380.43 12,638.74 21.76%
SPX S&P 500 1,110.88 1,340.20 20.64%
Chart

 
The average performance of our top five stocks underperformed the market. Shenandoah (NASDAQ:SHEN) underperformed the market and its peer over one year but shares bumped the 10% gain several times through out the year.  Any investor looking into this stock should be aware that they pay dividend once a year during November. Please note that these figure exclude dividends and are based purely on price appreciation.

 
Disclaimer:
On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.



Disclosure: I am long WEYS, TGT, SYY.
Stocks: SJW, WABC, CHFC, WEYS, TGT, SYY, HGIC, HHS, HTLF, CALM