This article is part of our Rising Star Portfolios series.
Not long ago I posed the question: How important should dividends be in your investing strategy? Over time, a portfolio composed of a healthy dose of dividend stocks can boost returns significantly. And the longer you hold them, the more compounding they do.
So I'm taking a second shot at finding a couple more dividend ideas for my portfolio. I ran a screen for companies with a market cap between $5 billion and $10 billion trading on major U.S. exchanges, with an operating margin of at least 10% and a dividend yield of 2.5% or more. Five companies caught my eye, and there are two that I think I will look a little further into:
|
Company |
Operating Margin |
Dividend Yield |
|---|---|---|
|
Molson Coors |
13.2% |
2.5% |
|
Mattel |
15.5% |
3.3% |
|
Clorox |
19% |
3.2% |
|
Plum Creek Timber |
24.5% |
4.1% |
|
Dr Pepper Snapple |
18.2% |
2.7% |
Source: Capital IQ, a division of Standard & Poor's.
Seeing the forest for the trees
Plum Creek is a real estate investment trust. Without going too much into the weeds (or woods), REITs enjoy special tax considerations. As long as they hold most assets in real estate and pay out at least 90% of taxable income to shareholders in dividends each year, they are exempt from any corporate tax. A unique angle on Plum Creek is that its timber assets generally produce capital gains income, which gives shareholders some additional tax advantages over standard REITs.
With 6.8 million acres, Plum Creek is the nation's largest private timberland owner, which is reason enough to consider it in my book. And while tough economic conditions have put a strain on business over the past few years, management sees recovery continuing as the year progresses. Historically, timber has served as a good hedge against inflation, and the company has been paying a dividend throughout its history; given its REIT status, Plum Creek looks like a nice way to grow the portfolio.
Clean as a whistle
Clorox is one of those companies that I consider timeless. Part of that has to do with the fact that it's almost a century old. And part of it has to do with the fact that their products are everywhere. Think about some of the brands under their umbrella: Glad, Hidden Valley, Formula 409, Pine-Sol, and of course the namesake Clorox brands. And it's not just consumers. Clorox Professional Products Division offers a wide range of industrial strength products to suit just about any commercial need.
More than 80% of the company's portfolio of products holds either No. 1 or strong No. 2 positions in the market, and those goods are found in more than 100 countries with manufacturing plants on five continents. Seeing as the company has paid a dividend for 38 consecutive years, Clorox looks like a way for investors to clean up over time.
The list goes on
There you have it. As it stands, I have four dividend-paying stocks in my Motley portfolio, but I'm always looking for more. Running screens and digging a little deeper is a great way to build a list of ideas. And I'll keep on searching for more great ideas to take my Motley portfolio to new heights. Got any great ideas of your own? Swing on by my discussion board and let's talk; you can also follow me on Twitter.
- Add Molson Coors to My Watchlist
- Add Mattel to My Watchlist
- Add Clorox to My Watchlist
- Add Plum Creek Timber to My Watchlist
- Add Dr Pepper Snapple to My Watchlist
This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. Click here to see all of our Rising Star analysts (and their portfolios).
