Rock-bottom interest rates are leaving fixed-income investors feeling cheated. A paltry 1% one-year CD rate does almost nothing to help investors pay for groceries and gas. And with no sign of interest-rate recovery in sight, now is a good time to consider steady, dividend-paying stocks.
I took a look at the dividend-paying landscape and liked what I saw in these five companies. I screened for current dividend yield close to or better than 3%, five-year dividend growth rates greater than 10%, and a payout ratio of 60% or less. I also screened for stocks I thought were a good buy in today's market.
High-growth companies generally have low payout ratios. As they mature, they tend to return more of the earnings back to investors and increase the payout ratio. By vetting for ratios of 60% or less, I attempted to find companies that still had opportunity to increase the dividend in the future.
|
Company |
Current Dividend Yield |
Dividend 5-Year Growth Rate |
Payout Ratio |
P/E Ratio |
PEG Ratio (5-Year Expected) |
|---|---|---|---|---|---|
|
BlackRock |
2.9% |
32% |
44% |
16.70 |
1.28 |
|
Cliffs Natural Resources |
3.6% |
26% |
7% |
6.10 |
13.21 |
|
Intel |
3.0% |
13% |
33% |
11.80 |
1.00 |
|
TAL International Group |
5.8% |
10% |
60% |
11.30 |
0.77 |
|
Universal Health Realty Income Trust
|
6.2% |
12% |
42% |
6.80 |
6.45 |
Sources: Yahoo! Finance; The Motley Fool.
BlackRock provides asset management services to institutional and individual investors. I like that its business model is one of recurring revenue. It has a stellar dividend growth rate and, at its current payout ratio, can reward shareholders with future dividend increases.
Cliffs Natural Resources is a mining and natural resources company that produces iron ore pellets, lump ore, and metallurgical coal. It pays a healthy 3.6% dividend, and with a payout ratio of a mere 7%, the company has a ton of wiggle room to increase its dividend over time. Cliffs Natural Resources has the largest PEG of the companies mentioned, but the most leeway to raise its dividend. That bodes well for its future.
Intel really needs no introduction. Its semiconductors have had a stranglehold on the PC industry for decades, and it is a thing of rare beauty to find a tech company that pays a dividend at all, let alone one that weighs in with a solid 3% yield. Yet at just a 33% payout ratio, there is still room for Intel to grow the dividend yield. And I believe Intel is still an incredible buy as it makes a more serious move into the mobile realm.
TAL International Group leases intermodal containers and chassis worldwide. It has the lowest PEG of the companies mentioned. Its payout ratio tops out at 60%, so while this dividend may not grow at the rate of others, it's already making shareholders quite happy with a noteworthy yield just shy of 6%.
Universal Health Realty Income Trust is a real estate investment trust that invests in health care facilities. Some of these include hospitals, rehabilitation centers, behavioral health care facilities, and surgery centers. As a REIT, the company isn't subject to federal income taxes so long as it distributes at least 90% of its taxable income to shareholders. And as its taxable income grows, so will your already hefty 6.2% dividend.
If you're a "glass half full" investor, then any of these five would make great additions to your portfolio. If you are a pessimistic investor nervously watching as the Dow kisses 13,000, or just have enough cash to buy one of these stocks, I'd go with Intel.
If you want more dividend stock ideas, take a look at a free report crafted by my Foolish cohorts: "Secure Your Future With 9 Rock-Solid Dividend Stocks."
