Do encouraging DuPont trends help these stocks with upcoming ex-dividend dates offer reliable dividends?
Investors are on the hunt for yields, and dividend stocks are offering payouts that federal bonds have yet to match or beat. The Wall Street Journal reports that dividend stocks, along with utilities and real-estate investment trusts (REIT), have posted bigger gains than the major indexes so far this year, boosting the Dow Jones Industrial Average (DJI) to record highs. Just last Thursday, the DJIA broke 17,000 for the first time in history.
And that's not the only record being broken. In 2013, S&P 500 (SPX) companies made all-time high dividend payments of $34.99 per share; as of June 30th, on a trailing twelve month (TTM) basis, S&P 500 companies were paying $37.38 a share. Furthermore, 423 of the stocks on the index pay dividends, a sixteen-year high for the index.
If you haven't yet, now may still be a good time to start watching dividend stocks, considering 1078 companies raised their dividends in the first quarter of the year—a new record. According to S&P Dow Jones Indices, this increase, which was 14.2% higher than the first quarter of 2013, was the largest since 1979.
Now that the second quarter is done, we decided to run a screen for dividend stocks, specifically focusing on those that appear to pay reliable dividend income. We began with a group of stocks with upcoming ex-dividend dates over the next two weeks. An ex-dividend date is the date by which investors must own shares of a particular stock in order to be eligible for a dividend payment.
Next, we narrowed down that group to stocks with a dividend yield higher than 2%. We frequently use 2% as a benchmark, but the number is especially fitting in this context given that the S&P 500 and DJIA have dividend yields of 1.98% and 2.29%, respectively.
And for our final screen, we ran the remaining stocks through the DuPont analysis to find those with signs of encouraging profitability. The DuPont analysis, which was developed by the Dupont Corporation (DD) almost 100 years ago, assesses a company's return on equity (ROE) by examining its profit margin, total asset turnover, and financial leverage from the most recent quarter (MRQ).
It lets investors see whether a company's profitability stems from an increase in leverage ratio or an increase in net profit margin and/or asset turnover. The former is viewed as a potentially negative source of growth while the latter is considered a more positive one.
We looked at ROE because, as Charles Schwab (SCHW) determined in 2009, companies with high ROE are better equipped to continue paying and increase their dividends than those with low ROE. This revelation is particularly useful for income investors since a company can halt or cut its dividends whenever it sees fit.
We were left with three stocks on our list. Do you think these stocks with upcoming ex-dividend dates will increase their dividends anytime soon? Use this list as a starting point for your own analysis, and let us know what you think in the comments.
Click on the interactive chart to view data over time.
The company offers a dividend yield of 3.27%. Its ex-dividend date is Tuesday, July 15th.
MRQ net profit margin at 19.43% vs. 10.12% y/y. MRQ sales/assets at 0.044 vs. 0.041 y/y. MRQ assets/equity at 4.329 vs. 4.528 y/y.
MRQ, annualized ROE at 28.83% vs. an industry average of 9.09%. ROE on a TTM basis at 24.76% vs. an industry average of -1.30%.
2. Caterpillar Inc. (CAT, Earnings, Analysts, Financials): Manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. Market cap at $69.48B, most recent closing price at $111.08.
The company offers a dividend yield of 2.52%. Its ex-dividend date is Thursday, July 17th.
MRQ net profit margin at 6.96% vs. 6.66% y/y. MRQ sales/assets at 0.157 vs. 0.149 y/y. MRQ assets/equity at 4.156 vs. 4.856 y/y.
MRQ, annualized ROE at 18.16% vs. an industry average of 28.35%. ROE on a TTM basis at 19.94% vs. an industry average of 17.11%.
3. Consolidated Communications Holdings Inc. (CNSL, Earnings, Analysts, Financials): Provides telecommunications services to residential and business customers in Illinois, Texas, and Pennsylvania. Market cap at $905.49M, most recent closing price at $22.48.
The company offers a dividend yield of 6.90%. Its ex-dividend date is Friday, July 11th.
MRQ net profit margin at 5.56% vs. 4.47% y/y. MRQ sales/assets at 0.086 vs. 0.086 y/y. MRQ assets/equity at 12.238 vs. 13.998 y/y.
MRQ, annualized ROE at 23.51% vs. an industry average of 21.53%. ROE on a TTM basis at 23.28% vs. an industry average of -2.84%.
(List compiled by Mary-Lynn Cesar. Accounting data sourced from Google Finance. Dividend yield data sourced from Zacks Investment Research. Ex-dividend data sourced from The Street. ROE data sourced from Fidelity. All other data sourced from finviz.)
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Saul Centers Inc.(BFS, Chart, Download SEC Filings)
- Caterpillar Inc.(CAT, Chart, Download SEC Filings)
- Consolidated Communications Holdings Inc.(CNSL, Chart, Download SEC Filings)
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