A recent search for dividend values drew some comments asking about higher-yielding stocks, and since you asked, I'll give it a try. To find some high-yielding stocks, a CAPS screen was run with the following settings:
- Dividend yield greater than 5%.
- P/E ratio positive and less than 20.
- Revenue and earnings growth each positive over the past three years.
- Market capitalization greater than $250 million.
- Rated by our CAPS community at four or five stars (out of five).
The screen kicked out 33 matches spread across the six sectors listed below.
|
Sector |
No. of Screen Matches |
|---|---|
| Basic Materials | 12 |
| Financial | 9 |
| Technology | 4 |
| Services | 4 |
| Utilities | 3 |
| Consumer Goods | 1 |
There were no hits from the conglomerates, health care, or industrial goods sectors.
The company with the highest CAPS rating and dividend yield from each sector in the screen is listed below.
|
Company |
Current Dividend Yield % |
Price-to-Earnings (TTM) |
Sector |
CAPS Rating |
|---|---|---|---|---|
| MV Oil Trust | 10.9% | 9.6 | Basic Materials | ***** |
| Cal-Maine Foods (Nasdaq: CALM) | 5.3% | 10.4 | Consumer Goods | **** |
| Dynex Capital (NYSE: DX) | 11.3% | 9.5 | Financial | ***** |
| TAL International (NYSE: TAL) | 6.9% | 10 | Services | ***** |
| SK Telecom (NYSE: SKM) | 8.8% | 7.3 | Technology | ***** |
| National Grid (NYSE: NGG) | 7.6% | 11.7 | Utilities | ***** |
Source: CAPS Screen results. TTM = trailing 12 months.
MV Oil Trust is entitled to 80% of the net proceeds from MV Partners oil and gas properties. One reason for the high yield is that the gusher of oil revenue to the trust ends at the later of June 30, 2026, or when 14.4 million barrels of oil equivalent have been produced. As of the end of 2011, the trust had received payment for 4 million of its 11.5 MMBoe interest in MV Partners' production.
Cal-Maine is an egg producer. Its dividend policy is to pay out one-third of quarterly income. When the egg business is good, Cal-Maine is the goose laying golden dividend eggs. When the egg business sucks eggs, the dividend does too. That doesn't make it a bad investment, but it does make for erratic payouts. Since implementing the policy, Cal-Maine's quarterly has ranged from a goose egg to a feather over $0.80 per share.
Dynex is a mortgage REIT -- these companies borrow short-term and purchase mortgage-backed securities. This has been a recipe for very high yields over the past few years, and that's likely to continue as long as the Fed holds rates near zero.
TAL has a fairly simple business model. Buy shipping containers and lease them out.
SK Telecom provides wireless service in South Korea. A quick glance at the numbers shows promise. High yield, value-territory P/E, and a low payout ratio get SK added to my Watchlist.
National Grid is an electric and gas utility with operations in Great Britain and the U.S. Northeast. National Grid plans a dividend hike of 4% next year and will announce a new dividend policy in 2013. My Foolish colleague Jim Royal holds National Grid in The World's Best Dividend Portfolio.
Screen results should always be considered a start for further research, not outright buy recommendations. These stocks look attractive, but high yields are often a warning of problems, risks, or unsustainable payouts. Investors should always dig to find why the market is pricing stocks for high yields in a low-yield world.
- Add TAL International Group to My Watchlist.
- Add SK Telecom to My Watchlist.
- Add National Grid to My Watchlist.
- Add MV Oil to My Watchlist.
- Add Dynex Capital to My Watchlist.
- Add Cal-Maine Foods to My Watchlist.
