5 Dividend Boosts Worth Noting
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Last week we saw countless companies declare their quarterly dividend, and a select few that elected to increase their yield compared to last year. In this piece I am looking at five that might present a good investment opportunity to shareholders.
For this particular piece, I am using one of the value-seeking strategies found in my book, Taking Charge With Value Investing (McGraw-Hill, 2013) -- seeking value in stocks that trade with valuations that are less than the broader market, but with greater growth. Hence if the S&P 500 is trading at 19.23 times earnings and at 1.52 times sales with (0.51%) growth in Q1, then a company that is cheaper with positive growth might indicate upside relative to the S&P 500.
- Orchids Paper Products is a manufacturer of tissue products, a small cap company with a market capitalization of just $175 million. Yet despite being small, it is stable and profitable, and increased its industry-leading yield by 16.66% last week. The company is currently growing by 3% (outperforming the market) and is valued slightly cheaper than the S&P 500 as well. Thus I say it might make a good investment regardless of the market’s future performance.
- Spartan Stores is a regional grocery distributor and retailer, trading with a market cap of just $375 million. Last week the company increased its yield by 12.50%, making it very attractive considering the discount that it trades to the broader market. If there is a negative to its investment outlook it’s that the company has zero growth and has traded relatively flat since the recession. With that said, the stock is cheap, and with a 2.09% yield (that has increased 80% in the last five years) it should become a better long-term performer versus the S&P.
- TE Connectivity is a $20 billion secular company, one that designs and manufactures over 500,000 products that connect and protect the flow of power and data inside a number of products used by consumers and industries. Aside from increasing its yield by 19% last week, the company also trades at a discount to the market. With it growing near equal to the rate of economic growth, I think its value should equate to upside as a long-term investment.
- KeyCorp is a regional financial institution with a market cap of $10 billion. The company increased its yield by 10% last week and has strong upside potential with the rest of the financial industry. Unlike the previous three stocks, KeyCorp is cyclical, needing a strong economy to produce strong fundamental growth. However, with the housing market on the rise, it might be a good addition to your portfolio with deep value being presented.
- Coach is also a cyclical stock, as it develops apparel such as handbags and wallets for mostly women. The company has 7% growth (significantly more than the S&P 500) and also greater than the retail industry. Last week the company increased its yield by 12.50%, thus it has become a high-yield investment. In addition, the company trades at a discount to the S&P 500 with a P/E ratio of just 16, meaning it might become a good investment in your portfolio.
Currently, the S&P 500 is paying out a yield of 2.03%, therefore each of the companies on this list have a greater yield (after recent boosts) and trade at a discount compared to fundamentals. This comparison is one of the first steps in determining if a stock might present upside. Next, you have to determine if the investment might fit into your portfolio, with your own due diligence. Overall, I think this individual research of these five companies is worth your time, as you might find a good long-term investment in a company that gives back to its shareholders.
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Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach and KeyCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!