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5 Stocks Showing Impressively Robust Dividend Yields - views
Ever since the Great Recession of 2008 took root, the U.S. Government has done all in its power to boost the economy by keeping interest rates at historical lows. That's been a real help for borrowers as mortgages, corporate bonds and other forms of debt can be issued with low interest expenses. But it's been a nightmare for savers as they try to find high-quality investments that offer payouts robust enough to live on.
Yet if you know where to look, you can find impressive income opportunities across the investing spectrum. A wide number of Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs), for example, can deliver 6% or 7% dividend yields. Here are five companies -- outside of those two categories -- that sport dividend yields in excess of 5%. They are of fairly high quality, as Standard & Poors has selected them to be members of the S&P 500, S&P 400 (a mid-cap index) or the S&P 600 (a small-cap index).
Here are five impressive yielders 5 Rock Solid Yield Plays that can help your portfolio to produce higher income streams.
Big Tobacco no longer holds sway over the American public. Fewer of us smoke or chew tobacco, but for those that still do, it remains an expensive habit―and quite profitable for the major tobacco producers. Reynolds American (RAI), which owns five of the top 10 selling brands in the U.S. (including Camel and Pall Mall) is a poster child for the industry's still-robust financial picture.
Like many other firms, Reynolds is squeezing out costs to expand margins, even as top-line growth remains anemic. That has helped boost Return on Equity (ROE) from 23.6% in 2010 to 26.3% in 2011, on its way to around 30% this year. The rising ROE has helped RAI to generate at least $2 billion in operating cash flow in four of the past five years, and that's led to steady dividend increases.
Reynolds American's dividend rose 17% in 2011 to $2.15 a share, and it's up another 10% this year to $2.36 a share. That works out to be a 5.5% yield, which is among the highest among the tobacco producers.
This provider of analog chips was spun out from Harris Semiconductor (HRS) nearly a decade ago, and has been a consistent dividend producer ever since. The company has paid out exactly 48 cents a share in each of the past four years, which works out to be a 7% yield at current prices. It's unusual to find such a robust yield in an industry that generally tends to shy away from payouts.
Intersil's (ISIL) focus on analog chips is unsexy, but steady, enabling the company to produce a cumulative $640 billion in free cash flow over the past six years. Even if cash flow dipped in the face of an industry slowdown, Intersil's $400 million cash balance ensures that the company will be able to stand by that dividend until industry fortunes improve.
This weight loss management firm has lost some market share to rival Weight Watchers (WTW), and sales, which fell from $500 million in 2010 to $400 million in 2011, appear to be stuck at that lower level again in 2012. That helps explain why shares have fallen from $30 in early 2010 to a recent $8.
Yet all the while, Nutrisystem (NTRI) has been earnings enough to support its 70 cents a share annual dividend, which implies a yield of above 9%. Such a high yield may lead to questions about whether the dividend may be cut.
Well, management has not talked about a dividend cut, and recently told investors that a series of new marketing initiatives should help business to rebound in 2013, presumably eliminating the need to cut the dividend. Even if the dividend were to be cut by half, the resulting yield would still be an impressive 4.5%.
This provider of postage-labeling equipment has boosted its dividend every year for three decades. But investors have come to question if that will keep happening, as sales are on track to fall for the fourth straight year in 2012 to a projected $5 billion. As a result, a stock that traded near $40 five years ago is now around $11.
The good news: revenue declines have been fairly modest, and Pitney Bowes (PBI) still throws off hefty free cash flow (which has never fallen below $350 million in any of the past four years. The better news: the sharp drop in the stock has pushed the dividend yield up to 13.5%. It's wise to assume that this dividend will no longer be boosted. In fact, it may be trimmed from the current $1.50 back to just $1. That still equates to a hefty 9% dividend yield.
Tough economic times have led to the advent of "staycations," which has been a helpful trend for this eponymously-named operator of theme parks. Revenue exceeded $1 billion for the first time in the company's history in 2011.
Yet Six Flags (SIX) wasn't always a very appealing investment. This company once carried more than $2 billion in debt and had to be restructured through a bankruptcy process. Nowadays, management is paying off debt at a rapid pace, and the long-term debt has moved below $1 billion.
With debt concerns receding, management has begun to earmark Six Flags' considerable cash flow towards a dividend. The company recently hiked its quarterly payout, which translates into a 6.3% yield on an annualized basis.
Shares of Six Flags have staged an impressive rally since the company exited bankruptcy in 2010, so you shouldn't expect too much more stock upside in coming quarters. But that dividend payout appears to be rock solid, so you need not worry about any cuts to that juicy yield.
To see these stocks in action, visit the These 5 Tech Stocks Are Screaming Bargains portfolio.