Dividends 12 Months A Year

4/14/2014


The S&P 500 Index ended 2013 with 418 companies paying a dividend, the highest year-end total in 15 years. A handful of new dividend payers have pushed that count above 420 this year.

More choices do not necessarily mean better dividend-paying options for investors, especially those fixated on yield. S&P 500 dividend stocks yield 2.2% on average, below the index's average of 2.5% since 1990. The lower yield reflects both the stock market's recovery since 2009 and corporate management's emphasis on stock buybacks as supplements to or substitutes for dividends.

Many income investors crave the reliable, quarterly cash stream dividends offer. Below, we present a portfolio of 27 stocks that provides those cash flows every month. Not only does the portfolio provide monthly dividend income, but it also focuses on quality stocks, positioning investors to benefit from price appreciation and dividend growth.

DIVIDENDS EVERY MONTH
The following 27 stocks yield at least 1.5%. A portfolio containing equal-dollar amounts of each stock would yield 3.0%. Recommendations from Upside, our sister newsletter that focuses on small-cap stocks, are shown in bold, while Top 15 Utilities recommendations are presented in green. The rest are on our buy lists. Payout ratio reflects the percentage of earnings paid out in dividends. Only AmeriGas ($44; APU) and Och-Ziff Capital Management ($13; OZM) pay out more than 70% of profits as dividends. Both are partnerships for which traditional earnings are not the best measure of profits, and the high payout ratios do not spook us.
Company (Price; Ticker)
Div.
($)
Yield
(%)
Div.
Payout
Ratio
(%)
3-Yr.
Ann.
Div.
Growth
(%)
Trailing
P/E
Ratio
Stock-
Market
Value
($Bil.)
Quadrix
Overall
Score
Sector
Dividends paid January, April, July, and October
AmTrust Financial
($36; AFSI)
0.80
2.2
24
21
11
2.9
100
Financials
Comcast
($49; CMCSa)
0.90
1.8
36
26
20
129.6
76
Discretion.
Dow Chemical
($48; DOW)
1.48
3.1
60
17
19
57.7
96
Materials
Fifth Third Bancorp
($22; FITB)
0.52
2.3
26
124
11
19.7
90
Financials
J.P. Morgan Chase
($59; JPM)
1.60
2.7
27
89
10
223.5
81
Financials
Macy's ($58; M)
1.00
1.7
25
68
14
21.9
97
Discretion.
Schlumberger
($98; SLB)
1.60
1.6
33
13
21
130.5
85
Energy
UGI ($45; UGI)
1.13
2.5
43
7
17
5.3
80
Utilities
Union Pacific
($185; UNP)
3.64
2.0
39
34
20
85.4
90
Industrials
Dividends paid February, May, August, and November
Alliant Energy
($56; LNT)
2.04
3.6
62
6
17
6.2
68
Utilities
AmeriGas
($44; APU)
3.36
7.6
125
6
16
4.1
73
Utilities
Apple ($523; AAPL)
12.20
2.3
30
NM
13
471.9
93
Technology
Capital One Fin'l
($76; COF)
1.20
1.6
16
68
10
44.1
86
Financials
CMS Energy
($30; CMS)
1.08
3.7
65
16
18
8.0
75
Utilities
CVS Caremark
($73; CVS)
1.10
1.5
28
37
18
87.9
90
Staples
Idacorp ($55; IDA)
1.72
3.1
48
9
16
2.8
87
Utilities
Och-Ziff ($13; OZM)
1.79
14.1
96
17
7
6.1
98
Financials
PNM Resources
($27; PNM)
0.74
2.7
52
9
19
2.2
64
Utilities
Dividends paid March, June, September, and December
Avista ($31; AVA)
1.27
4.1
68
7
17
1.9
75
Utilities
BlackRock
($302; BLK)
7.72
2.6
47
19
18
52.3
88
Financials
GATX ($66; GMT)
1.32
2.0
38
3
19
3.1
90
Industrials
Kroger ($44; KR)
0.66
1.5
23
16
16
22.9
90
Staples
Magna Int'l
($97; MGA)
1.52 e 
1.6 e
21
45
13
21.9
99
Discretion.
Norfolk Southern
($95; NSC)
2.16
2.3
37
13
16
29.8
87
Industrials
Penske Auto.
($43; PAG)
0.72
1.7
26
NM
15
3.8
84
Discretion.
Qualcomm
($79; QCOM)
1.40
1.8
33
21
19
135.8
97
Technology
Wells Fargo
($49; WFC)
1.20
2.5
31
79
13
261.7
96
Financials
Portfolio Average
3.0
43
31
16
68.3
86
NM Not meaningful because the stock didn't pay dividends three years ago.    
Note: Quadrix scores are percentile ranks, with 100 the best.     e Estimated.

All of these stocks are suitable for purchase as part of a diversified portfolio. The stocks are recommended in either the Forecasts or Upside, our sister publication focusing on smaller companies. Some of the Forecasts names, while not on our buy lists, are members of the Top 15 Utilities portfolio.

At 3.0%, the portfolio offers a higher average dividend yield than the S&P 500, yet its average payout ratio of 43% is roughly comparable to the index average. Most of the stocks in our portfolio have a long, solid history of dividend growth. Our stocks also look inexpensive, averaging P/E ratios of 16, or 19% below the average for S&P 500 dividend-payers.

The dividends-every-month portfolio skews heavily toward financials and utilities (26% of components), though it also gives investors exposure to sectors not typically known for their dividends, such as industrials, materials, and technology. Stocks from eight of the 10 S&P sectors are present in the portfolio.

DIVIDENDS BY SECTOR
----------- Sector Average, Dividend Payers -----------
Sector (No. Of Cos.)
No. (%) Of
Dividend Payers
Yield
(%)
Dividend
Payout
Ratio
(%)
3-Year
Annual.
Dividend
Growth

Trailing
P/E
Ratio

Quadrix
Overall
Score
Cons. Discretionary (84)
65
(77)
2.0
38
14
19
66
Consumer Staples (41)
39
(95)
2.4
47
7
21
60
Energy (44)
39
(89)
1.9
37
13
22
60
Financials (82)
78
(95)
2.2
43
27
19
64
Health Care (54)
33
(61)
1.6
28
17
18
65
Industrials (64)
61
(95)
1.8
34
15
19
67
Materials (31)
30
(97)
1.9
39
14
20
61
Technology (65)
44
(68)
2.0
35
24
18
73
Telecom Services (5)
5
(100)
7.0
98
(5)
18
69
Utilities (30)
30
(100)
3.7
65
4
19
62
S&P 500 Index (500)
424
(85)
2.2
41
16
19
65
Note: Averages exclude payout ratios below 0 or above 200%, growth rates above 200%, and P/E ratios below 0 or above 75. Quadrix scores are percentile ranks, with 100 the best.

Some of our favorite picks are profiled below.

Apple ($523; AAPL) holds $159.25 billion in cash and marketable securities, which exceeds the market value of 481 companies in the S&P 500 Index. And that comes after spending $15 billion on dividends and $28 billion on stock buybacks in the six quarters ended December. Apple raised its quarterly dividend 15% last April, and we expect at least a modest hike this month.

Apple has reportedly entered talks to buy a $479 million stake in a unit of Japan's Renesas Electronics that makes semiconductors for power-efficient displays in smartphones. The deal would give Apple more control over its supply chain and maintain its cautious approach toward acquisitions — Apple has never paid more than $1 billion for another company. Apple, yielding 2.3% and earning a Value rank of 94, is a Buy and a Long-Term Buy.


BlackRock's ($302; BLK) 2.6% yield compares favorably to its S&P 500 sector average of 2.2%. The company raised its quarterly dividend 15% in January, marking the fifth straight year of at least 9% growth. BlackRock generated record free cash flow in 2013, up 131% to $2.38 billion. Fund flows for U.S. asset managers are well ahead of 2013 levels, though smaller managers may be driving much of that growth. When BlackRock announces March-quarter results April 17, analysts expect earnings per share of $4.15, up 14%, on 9% revenue growth.

Amid its largest reorganization since 2012, BlackRock named Rob Goldstein, age 40, as its new COO, replacing Charles Hallac, who is undergoing treatment for colon cancer. The move makes Goldstein a leading candidate to eventually succeed CEO Larry Fink, 61. The stock is a Long-Term Buy.


Fifth Third Bancorp ($22; FITB) won approval from the Federal Reserve last month to increase its quarterly dividend 8% to $0.13 per share this year. This would mark the bank's fifth dividend hike in three years, as Fifth Third rebuilds a distribution cut to a penny per share during the financial crisis. Combined with stock buybacks, the bank plans a total payout ratio this year in the middle to upper end of its long-term range of 60% to 80%.

Next in focus will be March-quarter results, with the consensus projecting earnings of $0.41 per share, down 11% on an 8% decline in revenue. The modest expectations reflect a slowdown in mortgage banking, though Fifth Third should benefit from a continued a pickup in consumer and industrial loans. Fifth Third, set to report results April 17, is a Buy and a Long-Term Buy.


Macy's ($58; M) disciplined promotional activity helped the retailer cope with a soft retail environment last year. Sales rose just 1% in fiscal 2014 ended January, yet Macy's expanded its operating profit margins for a fifth consecutive year to their highest level since at least 1980. Operating cash flow advanced 13% to $2.55 billion last year, while free cash flow rose 28% to $1.58 billion.

The department-store chain last raised its dividend when it announced April-quarter results in May 2013, boosting the payout 25%. The dividend has grown at an annualized rate of 68% over the past three years, compared to an average of 18% for S&P 500 stocks in the consumer-discretionary sector. Given the retailer's recent cash-flow growth, investors could see another generous hike. Scoring at least 95 for both sector-specific ranks, Macy's is a Buy and a Long-Term Buy.


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