Float Your Boat With Water Utilities

My bet is on water. I can imagine -- even yearn for -- living in a world without most so-called necessities (cars, TVs, yoga mats), but I cannot envision life on this planet without water. Yet America and the world better get prepared for a future with less and less available. An Interior Department study released in April said three major western river basins providing water to eight states could decline by as much as 8 to 14 percent over the next forty years … and this region is the fastest growing in the US. I’m not saying start filling up your bathtub right now, I'm just suggesting taking a good long look at buying into a water utility company to help your portfolio grow -- if not for yourself, then for your children.... more

Rx For Amgen: Issue Dividend

Amgen (Nasdaq: AMGN) must have been quite shocked when it looked at itself recently and saw a stodgy big-pharma company, rather than the young lion of the cutting-edge biotech world. The only difference, it seemed, between Amgen and traditional pharmaceutical makers like Pfizer (NYSE: PFE), Merck (NYSE: MRK), and Eli Lilly (NYSE: LLY) was that the old-timers were dividend payers. Now, that has finally changed. Amgen has decided to issue its first-ever dividend, starting in the second quarter of this year. But while Amgen's payout ratio looks easily manageable, rival Merck's is disturbingly high. It's not like Amgen couldn't afford to throw a bone to its investors. Last year it had free cash flow of more than $5.2 billion, and that's on top of the almost $17.5 billion it's socked... more

The Most Important Factor in Selecting Dividend Growth Stocks

As I wrote in a recent post, with a lack of yield in most stocks today (due to the run up in stock prices), investment newsletters and other services are recommending dividend growth stocks in droves as potential yield is all they can hang their hats on with yield being tough to come by. I hope to expand upon the ideas in that post and further clarify the methods I use to find dividend stocks. Yield and a history of dividend increases are not enough to invest in a stock. If we're placing a value on future dividends, we must be relatively certain that the company's future earnings will grow and be able to support growing dividends down the road. There are a number of factors that contribute to whether future earnings will be sufficient for future dividend increases such as management,... more

Rallying High Yield Stocks Still Undervalued by Enterprise Value

If you’re interested in high yield income stocks that may be currently undervalued, this list may be a place to start your search. All of the stocks listed below meet the following criteria: Market cap above $300M Dividends between 4-7% Rallying above their 20-day, 50-day and 200-day moving averages Undervalued by the Levered Free Cash Flow / Enterprise Value ratio (LFCF/EV) LFCF/EV provides a metric considered to be more accurate than market capitalization to determine a company's value. It works by comparing a company’s estimated takeover cost after cash and expenses are deducted (EV) with its levered free cash flow (FLCF), or the amount of cash available to stockholders after interest payments on debt are made.Interactive Chart: Press Play to compare changes in analyst... more

The Most Promising Dividends in Health-Care Plans

Yields and growth rates and payout ratios, oh my! Before we get to those companies, though, you should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns. As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."... more

Dividend Scan: VZ, GT, UHT, AMWD, FRS, AAT

Several companies declared their future dividend plans despite the U.S .stock indexes remaining in a negative zone during the mid-day session. Some notable dividend payers are discussed here. Verizon Communications Inc. (NYSE: VZ) announced a quarterly dividend of 48.75 cents per outstanding share, payable on August 1, 2011 to shareholders of record on July 8, 2011. Shares were down 0.83 percent, or 30 cents, to trade at $35.87. Shares of Goodyear Tire & Rubber Co. (NYSE: GT) lost 0.66 percent, or 11 cents, to trade at $16.62 despite declaring a quarterly dividend of 74.25 cents per share. The dividend is payable on July 1, 2011 to shareholders of record on June 15, 2011. Universal Health Realty Income Trust (NYSE: UHT) shares added 0.07 percent, or 3 cents, to trade at $41.93 as... more

10 Dow Stocks Yielding Over 3%

With yields on 10-Year Treasuries dropping below 3% again on worries in the EU and another lousy jobs report, it's worth noting that there are 10 stocks in the Dow Jones Industrial Average yielding over 3%. As compiled by CNBC this week, this table highlights 10 of the 30 stocks comprising the index with a current yield over 3%. You'll recognize many of these names like AT&T (T), Pfizer (PFE) and General Electrics (GE) as household names. While some consider the DJIA to be somewhat out of date, the nature of the more established companies lends them to higher yields than your typical Nasdaq holding. (Click to enlarge) Pros and Cons of High Yielding Dow Stocks There has been much study on the performance of the highest yielding Dow stocks (usually termed "Dogs of the Dow"). In... more

Thoughts on Calculating Dividend Payout Ratio

We’ve been questioned regarding all of the dividend data that we use to analyze different stocks when we try to find the top choices (see our Top US Dividend Stocks and Top Canadian Dividend Stocks), especially about the payout ratio. It seems simple enough, but one reader was (rightfully) confused about seeing different numbers between two websites and was wondering which one was right and what could cause these differences. It seemed like the answer might be of interest to quite a few readers so we decided to publish it here. What is a payout ratio? The payout ratio is simply the portion of a company’s earnings that it chooses to pay out as dividends. Here's what it would look like as an equation: Payout ratio = dividends / earnings Or Payout ratio = dividend per share /... more

Dividend Investing in a Low Interest Rate Environment

Yields on fixed income instruments have been in a decline over the past 30 years. While yields on long term obligations were in the mid to high teens in the early 1980’s due to higher inflation, they have come down quite a bit in the early 2010’s to some of the lowest levels in US history. As a result, certain cash deposits such as Certificates of Deposits or Treasury Bills yield less than half a percent. Investors putting cash in any short-term fixed income instruments are not earning an adequate return on their investment and are also losing purchasing power of their savings because of inflation. As a result many savers have started taking on additional risk by getting into dividend paying stocks.Investing in companies that pay dividends could be rewarding, since it could lead to a... more

A Simulated Look at the Constituents Inside the MSCI USA High Dividend Index

The MSCI USA High Dividend Index outperformed its broader parent, the MSCI USA Standard Core, by a handsome amount since June 1995, the earliest backtest date for the index. That's a good omen for dividend income oriented investors. Let's look at the relative performance of those two indexes and then "reverse engineer" the MSCI methodology to simulate the constituents of the high dividend index. MSCI only releases index constituents to index subscribers. So far there is no investment fund that specifically tracks the index. They do, however, publish their methodology. We use a simulation of their methodology to make a pretty good guess what stocks are in the index. If there were an investment fund that tracked the high dividend index with replication, we could simply download the... more