Finding stocks yielding north of 4% isn't easy these days. Many of the leaders in market segments that income investors typically turn to for chunky payouts including utilities, financials, and REITs have been bid up to the point that they don't make the cut.
I decided to check out some of the more interesting names paying out more than 4% of their market caps in distributions. I'm going to make things even more interesting by avoiding the industries that I just mentioned. Let's see why I think that PetMed Express (PETS -0.48%), B&G Foods (BGS -0.18%), and Steelcase (SCS -2.58%) are three stocks that offer healthy dividends but also promising upside when it comes to capital appreciation.
Image source: Getty Images.
1. PetMed Express: 4.5% yield
Pet-related stocks were all the rage in 2020 when pet adoptions spiked during the pandemic. The stocks have fallen out of favor in 2021. Where do investors think the dogs and cats we took in last year are going to go?
PetMed Express is a direct seller of prescription and nonprescription pet medications and supplies. It saw its sales climb 9% for its fiscal 2021 year ending in March through its 1-800-PetMeds phone line and website, its sixth consecutive year of positive top-line growth.
Investors were disappointed to see an 18% decline in the fiscal first quarter ending in June, but the year-over-year comparisons were going to be challenging. PetMed Express' revenue soared 20% in the prior year's fiscal quarter -- its highest growth in more than a decade -- as investors stocked up on meds for their new pets. Results were actually in line with where PetMed Express was two years ago.
PetMed Express is confident about its future. It hiked its dividend in May, something that it has done 10 times over the past 12 years. The year-over-year comparisons will get challenging for the next couple of quarters, but our love of pets and the need to take care of them won't be going away anytime soon.
Image source: Getty Images.
2. B&G Foods: 6.3% yield
You may not think that strolling the supermarket aisle is field research for a stock yielding better than 6%, but that's because a lot of investors don't know about B&G Foods. It's the parent company of a lot of brands you know including Cream of Wheat, Ortega taco shells, and Green Giant vegetables. It added to its portfolio of more than 50 brands by acquiring Crisco last year in a $550 million deal.
Why is a company with so many big brands trading so low that it's yielding 6.3%? Well, it has missed Wall Street's profit targets in each of the past three quarters. It posted a 9% year-over-year decline in revenue in its latest quarter, and the heady growth it reported the quarter before that was entirely the handiwork of the Crisco purchase, as organic sales growth was flat.
This all seems pretty uninspiring, but keep in mind that a year earlier B&G Foods saw its sales soar 38% for the quarter ending in June. We went overboard in stocking our pantries a year ago during the shelter-in-place phase of the pandemic. B&G Foods will be just fine, and you're probably stocked right now with more B&G Foods brands than you think.
Image source: Steelcase.
3. Steelcase: 4.3% yield
If someone whispered "office furniture" in your ear as the next big thing, you might be standing too close to The Office's Michael Scott. On the surface, it's hard to get excited about Steelcase's high-performance seating, desk, and stylish storage solutions. Offices are contracting in the wake of the COVID-19 crisis, and many tastemaker companies are shifting to hybrid solutions, with more employees spending more time working from home.
Steelcase certainly felt the pinch in its fiscal 2021 ending in February given sales plummeted 30%. Any momentum it had going into the pandemic -- with revenue climbing 13% and 8% in the two previous fiscal years -- was lost. Even the 15% increase it posted for its latest fiscal quarter ending in May places it well below where it was two years ago.
Steelcase isn't going anywhere. It's been around since 1912. It was profitable through every single quarter of the otherwise ugly fiscal 2021. It has now restored its dividend to its pre-pandemic rate of $0.145 a share. Steelcase is also an innovator. It's launching the work tent pod this summer as a creative way to achieve separation in the workspace while also injecting some whimsy into the next new normal. Companies will have to update their furnishings, and Steelcase will be a leader in the reinvention of the corporate workspace. Back home, a hybrid workplace means that folks will have to invest more in upgrading their home offices.
PetMed Express, B&G Foods, and Steelcase are out-of-favor investments with strong dividend yields. They have solid businesses, and patient investors will be rewarded with payouts of at least 4% until the stocks rebound.
