After announcing the changes to its methodology applicable to the dividend aristocrats index series, Standard and Poor’s is adding 14 new dividend payers to its S&P High Yield Dividend Aristocrats index, a subset of the S&P 1500 Dividend Aristocrats. The S&P High Yield Dividend Aristocrats index tracks the performance of the constituents of S&P Composite 1500 that have raised dividends for at least 20 consecutive years. The earlier methodology included in the index those companies that paid dividends for at least 25 years in a row.
According to the new rules and the rebalanced index, there are 14 new high-yield additions to the S&P High Yield Dividend Aristocrats index. These newly added companies can serve as a basis for choosing the right high yield dividend plays for income portfolios. The 14 new high yield stocks boast an average dividend yield of 3.64%, with the yields ranging from the minimum of 1.5% to the maximum of 6.1%. Investors should consider these high yield stocks when building their income portfolios.
Aqua America Inc. (WTR) is a $3.7 billion company that operates regulated water or wastewater utility services in the United States. The company pays a dividend yield of 2.5% on a payout ratio of 61%. Aqua America’s peer American Water Works Company, Inc. (AWK) pays yield of 2.8%. The company has paid dividends for the past 65 years and increased them 21 times in the past 20 years. Over the past five years, its EPS and dividends grew at average annual rates of 8.4% and 7.2%, respectively. The EPS is forecast to expand at a rate of 7.2% per year for the next half decade. The stock has a forward P/E well above that of its industry. The stock is trading at $26.85 a share, up 21% from last year. Among fund managers, Aqua America is popular with Chuck Royce (Royce & Associates—check out its holdings) and billionaire Ken Griffin.
Atmos Energy Corp. (ATO) is a $3.3 billion company engaged in the natural gas distribution, transmission, and storage. Its dividend yields 3.7% on a payout ratio of 70%. Competitors ONEOK Inc. (OKE) and Xcel Energy Inc. (XEL) pay yields of 2.8% and 3.7%, respectively. The company has raised its dividend since 1989. Over the past five years, Atmos Energy’s dividend rose 1.5% per year, while its EPS grew at an annual rate of 3.7%. Analysts forecast the EPS growth rate to average 5.4% per year for the next five years. The stock is trading on a forward P/E below that of its industry. The shares are changing hands at $36.88 a share, up 9% over the last 12 months. Billionaires D. E. Shaw and Jim Simons are bullish about the company.
Avon Products (NYSE:AVP) is a $6.6 billion personal care company. It pays a dividend yield of 6.1% on a payout ratio of 101%. Its peer Revlon, Inc. (REV) does not pay any dividend, while rival Estee Lauder Companies (EL) pays a yield of 1%. Avon Products has raised dividends every year since 1990; this year will be the first since then that the company has failed to hike its dividend. Its dividend and EPS grew at average rates of 5.0% and 2.4% per year over the past five years. The EPS is forecast to expand at an average rate of 3.3% per year for the next five years. The stock has a forward P/E that is below that of the personal products industry. Avon Products’ shares are changing hands at $15.2 a share, down 46% from the year earlier. Fund manager Richard Perry (Perry Capital—see its top picks) and billionaire Jim Simons are major investors in the company. Recently we wrote an article that questions the capacity of Avon to continue paying its high dividend.
Cardinal Health Inc. (NYSE:CAH) is a $14.7 billion healthcare services company providing pharmaceutical and medical products and services. Its dividend yields 2.2% on a payout ratio of 32%. Peers AmerisourceBergen Corporation (ABC) and McKesson Corporation (MCK) pay dividend yields of 1.3% and 0.8%, respectively. The company has raised dividends for the past 23 years. Its dividend and EPS grew at average rates of 17.7% and 0.2% per year, respectively, over the past five years. Analysts forecast that the EPS will expand at an average rate of 12% per year for the next five years. On a forward P/E basis, the stock is trading at a small discount relative to its industry. The shares are changing hands at $42.51 a share, down 8.2% from last year. The stock is popular with fund manager Larry Robbins (Glenview Capital—check out its picks) and billionaire D.E. Shaw.
Chevron Corp. (NYSE:CVX) is a $209 billion oil and natural gas giant. It pays a dividend yield of 3.4% on a payout ratio of 26%. The company’s peers Exxon Mobil (NYSE:XOM) and ConocoPhillips (COP) boast dividend yields of 2.7% and 4.8%, respectively. Chevron has increased dividends for 25 consecutive years. Over the past five years, its dividend and EPS grew at average rates of 9.0% and 11.5% per year, respectively. The EPS is expected to increase at a rate of 2.1% per year for the next five years. On a forward P/E basis, the stock is trading on par with its industry. The stock is priced at $106 a share, flat from last year. It is popular with billionaires Cliff Asness and Jim Simons.
Community Bank System (CBU) is a $1 billion bank holding company. Its dividend yields 3.8% on a payout ratio of 51%. Competitors M&T Bank Corporation (MTB) and HSBC Holdings (HBC) pay yields of 3.3% and 4.1%, respectively. The bank has raised dividends for 20 consecutive years. Over the past five years, its dividend and EPS grew at average rates of 5.4% and 9.7% per year, respectively. Over the next five years, the EPS is expected to grow at 10.0% per year. The stock is trading at a forward P/E that is above that of the financial services industry. Its price-to-book ratio of 1.3 is above that for the industry as a whole. The stock is changing hands at $27.7 a share, up 12% over the past 12 months. Cliff Asness and Jim Simons are also big fans of the stock.
General Dynamics (GD) is a $23 billion aerospace and defense company. It is the world’s fifth largest military contractor. Its pays a dividend yield of 3.1% on a low payout ratio of 21%. Peers Lockheed Martin Corp. (LMT) and Raytheon Co. (RTN) pay yields of 4.6% and 3.6%, respectively. General Dynamics has increased dividends for 21 years in a row. Its dividend and EPS grew at average rates of 13.5% and 10.6% per year, respectively, over the past five years. Analysts forecast that the company’s EPS will expand at an average rate of 9.1% per year over the next five years. The stock has a forward P/E of 8.9, which is lower than that on the defense industry. The shares are trading at $64.86, down 8% from last year. Legendary investor Warren Buffett is one of major investors in the company.
MDU Resources Group Inc. (NYSE:MDU) is a $4.3 billion company that generates, transmits, and distributes electric power and distributes natural gas. It is also engaged in construction materials and services. Its dividend yields 2.9% on a payout ratio of 61%. Peers Black Hills Corporation (BKH) and Northwestern Corporation (NWE) yield 4.7% and 3.9%, respectively. The company has raised dividends since 1991. Over the past five years, its dividend increased at an average annual rate of 4.3%, while its EPS contracted at a rate of 6.8% per year, respectively. Analysts see EPS growth at 8.0% per year for the next five years. The stock has a forward P/E of 19. The shares are changing hands at $22.8 a share, up 3.3% from last year. Billionaires Cliff Asness and D.E. Shaw hold stakes in the company.
National Retail Properties Inc. (NNN) is a $3 billion retail property REIT. Its dividend yield is 5.3%, while the payout ratio is 162% of earnings and 88% of forecast 2012 funds from operations. The REIT’s peers Acadia Realty Trust (AKR) and DDR Corp. (DDR) pay dividend yields of 3.1% and 3.2%, respectively. National Retail Properties has raised dividends for 20 years in a row. The REIT’s dividend grew at 2.5% per year over the past five years, while EPS remained stagnant. The REIT has a price-to-forward FFO of 16.3. Its units are trading at $29.55, up 14.5% over the past 12 months. Billionaires Ken Fisher and D. E. Shaw are major investors in this trust.
SEI Investments Corp. (SEIC) is a $3.5 billion investment management company. Its dividend yields 1.5% on a payout ratio of 28%. The company’s competitors The Bank of New York Mellon Corporation (BK) and State Street Corporation (STT) pay yields of 2.4% and 2.2%, respectively. The company has raised dividends for 20 years. Its dividend grew at an average annual rate of 18.2% over the past five years, while EPS contracted at a rate of 1% per year. The EPS is forecast to expand at a robust average annual rate of 15% for the next five years. The stock has a forward P/E below that of the asset management industry. The shares are trading at $20 a share, down 8.3% from year ago. SEI Investments Corp. is popular with Chuck Royce and Ken Griffin.
UGI Corp. (UGI) is a $3.5 billion distributor and marketer of energy products. It pays a dividend yield of 3.5% on a payout ratio of 64%. Peers Ferrellgas Partners LP (FGP) and Suburban Propane Partners LP (SPH) pay dividend yields of 10.1% and 7.6%, respectively. The company has boosted dividends for the past 25 consecutive years. Over the past five years, its dividend and EPS rose at average annual rates of 8% and 4.6%, respectively. Analysts see the EPS growth remaining nearly flat for the next five years. The stock is trading on a forward P/E below that of its industry. At $31 per share, the stock is 3% down over the past year. Fund managers Clint Carlson (Carlson Capital—see its portfolio holdings) and Chuck Royce own shares in this company.
Universal Corp. (UVV) is a $1 billion leaf tobacco merchant and processor. Its dividend yields 4.2% on a payout ratio of 60%. Its rival Alliance One International, Inc. (AOI) does not pay regular dividends. Universal Corp. has raised dividends since 1971. Over the past five years, its dividend and EPS grew at average rates of 2.2% and 5.2% per year, respectively. The EPS is forecast to expand xx% per year for the next five years. The shares are changing hands at $46.6 per share, up 28.5% over the past 12 months. Billionaires D. E. Shaw and Israel Englander hold respective stakes in the company.
Universal Health Realty Income Trust (UHT) is a $549 million health care and human services REIT. Its dividend yields 5.7% on a payout ratio of 93% of funds from operations (trailing twelve months). Peers Healthcare Realty Trust Incorporated (HR) and HCP Inc. (HCP) yield 4.9% and 4.4%, respectively. The REIT has boosted its distribution for 24 consecutive years. Its EPS expanded at a rate of 15% per year over the past five years, while distributions grew at 1.4% per year over the same period. Analysts expect the EPS to grow at 2.4% per year for the next five years. The stock has a price-to-FFO of 16.6. The stock is trading at $43.45 a share, up 6% from last year. Billionaires Jim Simons and Cliff Asness hold small stakes in this REIT.
Westamerica Bancorporation (WABC) is a $1.4 billion bank holding company. Its dividend yields 3.1% on a payout ratio of 49%. Peers U.S. Bancorp (USB) and Cathay General Bancorp (CATY) pay dividend yields of 2.4% and 0.2%, respectively. The bank has raised dividends since 1990. Its dividend grew at 1.9% per year over the past five years, while EPS contracted at 0.4% per year over the same period. Analysts forecast that the bank’s EPS will expand at 5.8% per year for the next five years. The stock boasts price-to-book of 2.4, which compared to the ratio of 0.9 for its industry on average. The stock is trading at $48.37 per share, falt from last year. Billionaires Ken Fisher and Jim Simons own stock of this company.
