4 Dividend Stocks With Strong Growth Prospects

Includes: AVY, GE, HI, MPR
by: Matt Schilling

With the average US based Savings Account yielding 0.25% investors have been looking toward other investments with much higher yields. In this article I've featured four companies with moderate growth and conservative yields.

General Electric (GE) - General Electric is one of the largest and most diversified companies in the world, and yields one of the highest dividends in the Dow 30. Currently yielding 3.4% and trading with a P/E ratio of 16 GE continues to attract investors from all walks of life. Earnings are due out April 19th and analysts are expecting $0.33/share, however $0.32 - $0.37/share would be well within reach.

Analysis: General Electric is a proven winner and very big proponent of clean energy. A long-term buy & hold stock that yields very nicely. Their move into alternative energy solutions such as wind power will no doubt have a positive influence on the growth of the stock. For example, let's look at our neighbors to the north, Canada. GE has announced it will power nine new wind turbines reaching 320,000 homes and supplying 1,200 megawatts of clean energy.

Avery Dennison Corp. (AVY) - Avery Dennison Corp has consistently raised its dividend since 2009, which some would say signals much needed growth by the company, which has struggled some in the last 5 years. AVY currently yields 3.6% and trades with a P/E ratio of 17. Most investors would say the stock is pretty cheap at these levels and upcoming earnings should provide evidence of positive growth. Analysts, on average, are expecting AVY to earn $0.45/share, however recent results have me seeing a range of $0.43/share - $0.51/share.

Analysis: Avery Dennison recently sold its Office and Consumer products business to 3M for $550 million. "Avery Dennison intends to use the proceeds from the transaction primarily to reduce debt, make additional pension contributions, and repurchase shares. This transaction will not negatively impact the Company's common stock dividend" (I). This was a great move on Avery's part and it carries outstanding potential and for shareholders. The pension contributions keep employees happy, the share repurchase program puts their cash to good use, and the reduction of debt could eventually result in an increased dividend.

Met-Pro Corp. (MPR) - It may be the smallest of the group in terms of market cap but Met-Pro has seen an average of 9.07% in sales growth over the last four quarters. MPR yields 2.7% and trades with a P/E ratio of 21.8 making it cheap by most standards. MPR announces earnings in late June and is depending on their recent $500,000 deal to help enhance growth. Analysts are expecting earnings of $0.12/share on revenue of $25.3 million, however I wouldn't be surprised if MPR announces on the higher side of the $0.12 - $0.15/share range on revenues of $26.2 million.

Analysis: Here's a company with very little volatility, but an enormous global footprint. MPR has a presence not only in the US, but in Europe, Asia and South America. MPR provides clients with environmentally sound solutions that are designed on an individual basis. If we highlight their water filtration solutions, we don't just see something that refreshes your tap water, but a company that understands the bigger picture. "Mefiag® offers a complete line of horizontal disc, cartridge, bag, carbon, and oil absorbing filters and Carbolux® carbonate precipitators for tough, corrosive applications. Products include the Sethco® filter line which is sold, manufactured and distributed by Mefiag® USA. Mefiag® also offers corrosion resistant FRP, polypropylene, stainless steel, and PVDF pumps in standard end suction, magnetic drive, and vertical configurations" (II). If their footprint continues to grow and deal sizes begin to surpass $1.5 million per transition, MPR is going to become a very steady growth play.

Hillenbrand, Inc. (HI) - This Batesville, Indiana based firm has seen average sales growth of 10.5% over the last four quarters and currently yields 3.4%. Shareholders have been pleased recently since HI has beaten quarterly earnings estimates by double-digits since mid-2011. Earnings expectations are once again expected to surpass estimates in the March 2011 quarter, with analysts expecting earnings of $0.50/share on $255.7 million in revenue. The company continues to be a major player in the death care industry and noting recent performance could be a great growth stock over the next 3-5 years.

Analysis: One of my favorite stocks that not only possesses a great yield but has seen a 13% increase in annual revenue compared to last year. Hillenbrand is ranked #1 in US casket sales, currently holding almost 50% of the market share.

One of the most impressive qualities Hillenbrand possesses is its ability to run a cost-efficient business. It's not so much about spending the most to get a decent return, but rather spending money in such a way that it's being put to good use and its results are visible. "They eliminate waste, improve quality and increase operational efficiencies. Lean business is also the backbone of our culture of execution. Batesville has proven that even a slow-growth business can drive superior financial returns by employing continuous improvement/lean business practices throughout the entire value chain. We will do the same for acquired companies" (III).

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