14 NYSE Dividend Kings: Mid and Small Caps With Low Payout Ratio

by: Kurtis Hemmerling

Income investing poses the challenge of finding the highest sustainable dividends with the lowest amount of risk.

To this end I chose one of the highest profile exchanges, the New York Stock Exchange, and screened for yields above 4%. I wanted to capture the mid-cap range and under with a decent price to free cash flow of under 20. Remember: cash is king with dividend paying stocks. Lastly, I wanted the payout ratio to be under 70%. The following list of stocks will (hopefully) exclude closed-end funds.

14 Dividend Kings in the NYSE

  1. Niska Gas Storage Partners LLC (NYSE:NKA) 7.05%
  2. CPI Corp. (NYSE:CPY) 5.14%
  3. Huaneng Power International Inc. (NYSE:HNP) 5.51%
  4. KKR Financial Holdings LLC (KFN) 5.85%
  5. H&R Block, Inc. (NYSE:HRB) 4.68%
  6. Douglas Dynamics, Inc. (NYSE:PLOW) 5.15%
  7. DPL Inc. (NYSE:DPL) 5.07%
  8. Telecom Argentina S A (NYSE:TEO) 5.22%
  9. The McClatchy Company (NYSE:MNI) 7.20%
  10. Tortoise Capital Resources Corp. (TTO) 5.04%
  11. BBVA Banco Frances S.A. (NYSE:BFR) 6.18%
  12. CMS Energy Corp. (NYSE:CMS) 4.34%
  13. FLY Leasing Limited (NYSE:FLY) 5.66%
  14. Costamare Inc. Common Stock $0 (NYSE:CMRE) 6.39%

Other Aspects to Consider

It should go without saying that you should check each stock very carefully first. Sometimes screeners make mistakes. Often, a company goes from annual dividends to quarterly and the screener doesn’t pick up on this. It may accidentally inflate the yield by 4x. There are dozens of reasons to look up each stock on this list first...it is a starting screen to generate long ideas for income investors.

Price to Book: Research carried out on low price to book stocks indicates that these may be good value picks provided the earnings are not sliding indicating poor future performance. Price to book ratios under 1.5 are as follows: NKA, HNP, KFN, TTO, and FLY.

Nest Year Earnings: Stocks with positive EPS forecasts for next year are: CMRE, CMS, NKA, CPY, HNP, HRB, PLOW, DPL, TEO. Also, that sometimes stocks may not have good analyst coverage and have no forecast earnings to report. (Read about unusual growth stocks with declining earnings here)

Long-term Debt: Long-term debt can hurt a company when interest rates climb, or when sales drop. Stocks with long-term debt to equity ratios over 1 are: CPY, HNP, HRB, MNI, CMS, CMRE.

Institutional Buying: Large buying obviously drives up prices, but even smaller buying can generate interest as other investors follow the leadings of ‘informed investors’. Positive institutional buying between quarters are: NKA, CPY, HNP, KFN, HRB, PLOW, DPL, and TEO.

Technical Activity: Sometimes, yields look attractive after a major crash. This would obviously cause some concern. However, a stock consolidating or making a bottom may give you dividend yield plus capital gain. Stock trending up may be safer bets as long as the stock also increases earnings to pay dividends with (thus maintaining yields), or a payout ratio with room to move up to sustain yields. However, an overextended trend may need to consolidate thus flattening your capital gains.

  1. Stocks in a medium up-trend: NKA, KFN, DPL, TEO, MNI (volatile 3 month up-trend), TTO, CMS, FLY, and CMRE.
  2. Stocks that recently fell or trading sideways medium term: CPY, HNP, HRB, PLOW, and BFR(currently consolidating from up-trend in latter part of 2010).

Again, if one or two of these jumps out at you, look into them further. Only so much can be told from financial screens and income reports. You need to also read the headlines to see what caveats or boosts could be coming. Screening tools often make mistakes as you can read about in this article, so please do your due diligence and maybe you will find a dividend paying stock king in the NYSE that is mid-cap or less.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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