I have searched for profitable companies that pay very rich dividends and that are in a short-term uptrend, in a mid-term uptrend and in a long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode. Those stocks would also have to show a low forward P/E ratio.
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. All the data for this article were taken from Yahoo Finance and finviz.com. The screen's formula requires all stocks to comply with all following demands:
- The forward dividend yield is greater than 4.30%.
- The payout ratio is less than 90%.
- Last dividend declared is greater or equal the last dividend paid.
- Forward P/E is less than 16.
- The stock price is above the 20-day simple moving average (short-term uptrend).
- The stock price is above the 50-day simple moving average (mid-term uptrend).
- The stock price is above the 200-day simple moving average (long-term uptrend).
After running this screen on August 22, 2013, before the market open, I discovered the following three stocks:
Valassis Communications Inc. (NYSE:VCI)
Valassis Communications, Inc., together with its subsidiaries, provides media solutions primarily in the United States and Europe.
Valassis Communications has a very low trailing P/E of 9.62 and a very low forward P/E of 8.28. The price-to-sales ratio is very low at 0.52, and the price to free cash flow for the trailing 12 months is also very low at 9.26. The PEG ratio is extremely low at 0.36, and the average annual earnings growth estimates for the next five years is very high at 26.70%. The forward annual dividend yield is high at 4.35%, and the payout ratio is only 31%.
The VCI stock price is 0.07% above its 20-day simple moving average, 5.13% above its 50-day simple moving average and 7.18% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On July 25, Valassis Communications reported its second-quarter financial results, which missed EPS expectations by $0.07 and missed on revenues, the guides for the year EPS was in-line.
In the report, the company explained:
revenues were $495.9 million, a decrease of 8.2% from $540.2 million in the prior year quarter. This decrease was due primarily to an anticipated decline in revenues in the Neighborhood Targeted segment resulting from the change in certain client contracts to a fee-based media placement model, as well as the discontinuance of the sampling and solo direct mail products. Without the effect of these changes, second-quarter 2013 adjusted revenues increased 1.2%.
Second-quarter 2013 diluted earnings per share was $0.68, which included the negative impact of the aforementioned restructuring costs of $0.02, an increase of 33.3% from $0.51 in the prior year quarter, which included the negative impact of the aforementioned restructuring costs, asset impairments and other non-recurring charges of $0.25. Excluding these charges, second-quarter 2013 adjusted diluted EPS was $0.70 and second-quarter 2012 adjusted diluted EPS was $0.76. Second-quarter 2013 adjusted EBITDA was $66.2 million, a decrease of 13.8% from $76.8 million in the prior year quarter.
Valassis Communications' Outlook
Based on our plan and current outlook, we reiterate full-year 2013 guidance as follows:
- diluted earnings per share of between $3.05 and $3.20,
- adjusted EBITDA of between $290.0 million and $300.0 million, and
- capital expenditures of approximately $25 million.
2013 Planned Uses of Cash:
- Stock repurchase program: We assume the use of approximately 35-40% of free cash flow for stock repurchases during 2013. Our stock repurchase program does not obligate us to acquire any particular amount of shares of common stock, and may be modified or suspended at any time at our discretion.
- Quarterly dividend: In December 2012, the Board approved a cash dividend policy pursuant to which Valassis intends to pay a quarterly cash dividend to holders of its common stock. The dividend for the quarter ended June 30, 2013 was $0.31 per share of common stock.
Valassis Communications has recorded strong EPS growth during the last year, the last three years and the last five years; the annual rate of EPS growth over the past year was at 21.22%, over the past three years was at 27.82%, and over the past five years was at 21.11%.
Although VCI missed second-quarter EPS and revenues expectations, its valuation metrics are compelling, the company growth prospects are strong, and the company's guidance was positive. In my opinion, an investor in VCI stock can expect a capital gain along the very rich dividend.
Risks to the expected capital gain and to the high dividend payment include; a downturn in the U.S. economy, and the company's massive debt of $565 million.
New York Community Bancorp Inc. (NYSE:NYCB)
New York Community Bancorp, Inc. operates as a multi-bank holding company for New York Community Bank and New York Commercial Bank that offer banking products and financial services in New York, New Jersey, Florida, Ohio, and Arizona.
New York Community Bancorp has a very low debt (total debt to equity is only 0.06), and it has a low trailing P/E of 13.62 and a low forward P/E of 14.86. The average annual earnings growth estimates for the next five years is at 5.50%. The forward annual dividend yield is very high at 6.56%, and the payout ratio is at 89%.
The NYCB stock price is 0.42% above its 20-day simple moving average, 5.87% above its 50-day simple moving average and 15.06% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On July 24, New York Community Bancorp reported its second-quarter financial results, which beat EPS expectations by $0.05. The company reported GAAP earnings of $122.5 million, or $0.28 per diluted share, for the three months ended June 30, 2013, and $241.2 million, or $0.55 per diluted share, for the six months ended at that date. The Company also reported cash earnings of $132.5 million, or $0.30 per diluted share, for the current second quarter and $261.1 million, or $0.59 per diluted share, for the current six-month period.
In the report, the company explained:
In view of the strength of our capital and our solid second quarter earnings, the Board of Directors last night declared our 38th consecutive quarterly cash dividend of $0.25 per share.
Since NYCB valuation metrics are low, and the latest quarter financial results were good, a capital gain can be expected along the very rich dividend.
Since the company is rich in cash ($4.10 a share) and has very low debt, there is a hardly risk that the company will reduce its dividend payment. Risks to the expected capital gain include a downturn in the U.S. economy, and decline in the company's interest margin from its actual 3.15% level.
Orchids Paper Products Company (NYSEMKT:TIS)
Orchids Paper Products Company engages in the manufacture and sale of tissue products for the at-home market in the United States.
Orchids Paper Products has a very low debt (total debt to equity is only 0.19), and it has a trailing P/E of 20.56 and a forward P/E of 15.86. The current ratio is very high at 3.70. The forward annual dividend yield is very high at 5.05%, and the payout ratio is at 79%.
The TIS stock price is 0.71% above its 20-day simple moving average, 2.73% above its 50-day simple moving average and 20.30% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Analysts recommend the stock. Among the 3 analysts covering the stock, two rate it as a strong buy, and one rates it as a buy.
On July 24, Orchids Paper Products reported its second-quarter results.
Second Quarter Highlights
- Established a new quarterly record for both total net sales and converted product net sales of $29.2 million and $27.8 million, respectively.
- Converted product shipments were 2,080,000 cases, exceeding the prior record of 1,864,000.
- EBITDA in the second quarter of 2013 was $6.4 million, an increase of $1.4 million, or 27%, over the prior year quarter.
- Second quarter 2013 net income was $3.1 million, an increase of $906,000, or 41%, compared with $2.2 million of net income in the same period of 2012.
- Diluted net income per share for the second quarter 2013 was $0.39 per diluted share compared with $0.29 per diluted share in the same period in 2012.
Orchids Paper Products recorded strong EPS growth, and good revenue growth during the last five years; the annual rate of revenue growth over the past five years was at 6.20%, and the EPS growth was very high at 24.16%.
Since, Orchids Paper Products has recorded continuous growth, and the latest quarter financial results were good, a capital gain can be expected along the very rich dividend.
Risks to the expected capital gain and to the high dividend payment include; a downturn in the U.S. economy, and a decline in the demand for the company's products.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.