It's been a tough summer for investors, with market turmoil and bad news dragging nearly everyone down. For many investors, the easy solution to these challenges lies in steady dividend-paying stocks.
The Fool's been plenty active on the dividend front, from the basics to the highest-yielding to special opportunities for dividend-hungry investors. If you're like me, you like to see more than just a check every quarter. How about steady earnings growth, and leaders who are invested in the performance of their companies? I set out to find companies in this mold that have been double-teamed by the market, in the hopes that these powerful players might soar to the rim in the near future.
Setting the screen
I started my screen with a $500 million market cap floor, and looked for a minimum yield of 2.5%. To make the cut, companies also needed at least 5% revenue growth over the last three years, and at least 5% insider ownership. Limiting this screen to stocks at least 25% below their 12-month high -- the Dow is actually up over this period, though you wouldn't know it from pundits' howling -- brings up seven companies:
|
Company |
Current Yield |
3-Year Revenue Growth Rate |
Insider Ownership |
% Below 12-Month High |
|---|---|---|---|---|
|
Axis Capital Holdings (NYSE: AXS) |
3.3% |
7% |
5.4% |
26.5% |
|
BGC Partners (Nasdaq: BGCP) |
9.8% |
29.7% |
8.5% |
31.4% |
|
Strayer Education (Nasdaq: STRA) |
4.5% |
20% |
5.3% |
50.8% |
|
Atlantic Tele-Network (Nasdaq: ATNI) |
2.7% |
51.2% |
30.4% |
41.2% |
|
Validus Holdings (NYSE: VR) |
4.1% |
12.8% |
7.8% |
27.6% |
|
Brooks Automation (NYSE: BRKS) |
3.4% |
12.8% |
5.8% |
36.3% |
|
Evercore Partners (NYSE: EVR) |
3.1% |
20.1% |
9.9% |
34.2% |
Source: Fool.com and corporate financial statements.
The picks
It makes sense to look at more than a few quick numbers, to better find the companies that can outlast a full-court press. A dividend is only as good as the company behind it.
For example, Strayer has been caught up in a regulatory firestorm that threatens to undermine the entire for-profit education industry. Strayer's CEO also blamed a 20% drop in enrollment on bad press, rather than any structural problems. Do you want a defiantly angry coach calling the shots as the clock runs down? Probably not.
Axis Capital and Validus Holdings are both insurance companies based in Bermuda. As with any insurance business, their investing activities risk being caught by a turnover in the market. They've both grown book value per share fairly well over the past five years, and have avoided costly catastrophes that might wipe out their profits. If you're expecting big gains atop a decent yield, you might want to look elsewhere -- both companies' share prices have faced headwinds over the past three years, despite share buybacks. Blame it on the wacky weather, the lurching market, or anything you'd like, and keep looking. There are better opportunities.
The roll
Evercore and BGC Partners both operate in the investment field, although in quite different ways. Evercore focuses primarily on investment banking advisory services, specifically special situations like mergers and acquisitions, restructurings, and IPOs. BGC, on the other hand, provides the technology behind many complex market transactions, and also offers services to dealers that make such transactions.
Despite its drop, Evercore still looks costly, trading at a P/E well more than double that of BGC, and it also has a dangerous history of paying dividends while suffering deep losses. Even with its current profitability, Evercore's current payout ratio is 130%. Sadly, an abnormally high payout ratio also disqualifies high-yielding BGC, which checks in at an even loftier 155%.
Brooks Automation has a slim history of dividends -- it only began payments this month. The company supplies the semiconductor industry with tools to improve automation and functionality, and has been profitable this year after incurring losses in previous years. It's too early to tell whether or not this is a dividend for the long haul, or one that will crumble under a full-court press, but I'd add it to your Watchlist until more information's forthcoming.
Drive to the basket
Atlantic Tele-Network hasn't seen much love from the market this year, and its acquisition of Alltel subscribers from Verizon hasn't done anything for its bottom line. The company's been working through a lot of restructuring in the U.S. and Bermuda, which Fool contributor Harsh Chauhan believes will soon draw to a close. The company might even be able to boost its dividend soon; management predicted that Atlantic would complete its transition in the second quarter. With that quarter well behind us, Fools should definitely keep their eyes on this company.
Monitor these downcast dividend stocks by adding them to your Watchlist:
- Add Axis Capital to My Watchlist.
- Add BGC Partners to My Watchlist.
- Add Strayer Education to My Watchlist.
- Add Atlantic Tele-Network to My Watchlist.
- Add Validus Holdings to My Watchlist.
- Add Evercore Partners to My Watchlist.
- Add Brooks Automation to My Watchlist.
If you'd like to find out more, Motley Fool analysts have found 13 high-yielding dividend stocks that could be a great addition to a defensive portfolio. Read on with this free report!
