Do you stop at yield signs? If so, you're probably the kind of investor who values the perpetual trickle of interest income. There's no shame in that (in the latter, anyway). The freshly tax-advantaged perks of dividend distributions have made it fashionable for companies to either initiate payout policies or to hike existing programs.
That's not just a show of corporate charity. With the measly sub-1% interest offered by money market funds these days, any company that is able to dole out regular dividends expands its target audience of investors.
Let's get busy
In the spirit of our Motley Fool Income Investor geared to a new breed of yield seekers, let's take a look at five stocks that are paying out generous dividends.
By considering only stocks that yield better than 5% annually, I set the bar high. That's higher than the 4.6% rate that 10-year notes are paying. More than that, unlike the treasury paper with its static payout, these companies may very well improve their financial fortunes and hike the dividend a few times over the next 10 years.
Yes, there is a free lunch, but it's served by a lunch lady that forgot her hairnet. In other words, dig in carefully. The risk here is that things can go horribly wrong, the stocks might fall in value, and the dividend could be cut or eliminated completely. So check your risk tolerance at the door and let's take a look inside.
1. Eastman Kodak (NYSE:EK) - Picture this. A buggy whip behemoth wants to live in the age of innovation, even if it's at the expense of his bread and butter. That's where photography bulwark Kodak finds itself, grappling with the transition from film to a digital world.
How can a company with decades of developing experience not realize the developments in its own sector? Actually, the truth is that Kodak had been trying to make inroads into the digital space for years. This time, it means it. While it remains to be seen where the money lies in the age of digital photography, Kodak is rewarding its investors with a 6% patience payout.
2. Tupperware (NYSE:TUP) - Keeping things fresh is what Tupperware does best. Shareholders already know this, as they've been getting crisp quarterly checks to the tune of a 5.3% yield. Yes, the company's been stagnant on the top line and a slouch on the bottom line, but at just 10 times free cash flow, it's become a forgotten producer.
Our own Matt Richey provided an excellent overview of the company back in July, warts and all. Yes, Tupperware has got its problems. But where there's an emphasis on debt reduction coupled with insider buying, good things often happen to those who wait. In the meantime, enjoy the dividend.
3. Cedar Fair (NYSE:FUN) - Owning units in Cedar Fair has been a walk in the park -- an amusement park. The company operates a half-dozen regional parks along with five water parks. Last week, Amusement Today tapped the company's flagship Cedar Point coaster haven as the world's best amusement park for the sixth year in a row.
While the company struggled at the gate through the early part of the season, it came back strong in August. As a limited partnership with tax implications, the company not only delivers a hefty 6.3% yield, but has also been a generous provider. Cedar Fair has hiked its dividend 11 times over the past 10 years.
4. Mills Corp. (NYSE:MLS) - While I've avoided the "shooting fish a in a barrel" categories where high yields are the norm (utilities, tobacco companies and Real Estate Investment Trusts), allow me an exception with Mills. Unlike many troubled mall operators, Mills has thrived in this lackluster economy. Last month the company reported a 32% increase in funds from operations for its second quarter.
Thanks to its chain of namesake super-regional outlet malls, Mills has been the welcome recipient of growing penny-pinching mall traffic. And while its 5.9% yield may seem petty in comparison to other REITs, Mills has succeeded in marrying entertainment with the closeout concepts of coveted upscale retailers.
5. Champion Industries (NYSE:CHMP) - It wouldn't be right if I didn't toss in a high-yielding Green Gene into the mix. Champion is bogged down in the economy-sensitive office equipment market and is doing only marginally better with its printing business. Despite this, the company has been profitable.
The stock trades at less than book value and less than two times the company's working capital. Through acquisitions and some cost-saving initiatives, Champion is painting a rosy picture of the year ahead. I guess that one of the perks of being in the printing biz is that you have access to rose-colored tints. Still, the fact that the company has shown consistent profitability makes the 5.1% yield simply a bonus until the shares begin to appreciate under a kinder climate. After all, isn't that what champions do? Win?
Rick Aristotle Munarriz knows that you should slow down at a yield sign. Why? Because that's where opportunities often lurk. He owns a stake in Cedar Fair. Rick's other stock holdings can be viewed online, as can the Fool's disclosure policy.
