Two Dividend Stocks with Strong Analyst Support
Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This year is the year of the dividend stocks, hands down. Investors, spooked by recent events, have come to recognize the wisdom of owning stocks that provide a reliable stream of income in addition to offering upside potential. Once considered stodgy and old-fashioned, dividend-paying stocks are the favorites of the day.
I have already outlined eight companies that I believe should form the foundation of any dividend portfolio – the best of the best, the cream of the crop. I have also written about seven companies that I felt are underrated but merit further consideration for a dividend-growth portfolio.
Many of these stocks are also, due to the recent favor the sector has been enjoying, at or near their 52-week highs. If so, it might be prudent to wait for a bit of a pullback, perhaps in the 5% to 10% range, before entering any new positions. On the other hand, these stocks are presumably going to be in your portfolio for the long run, so do not be so eager to save a few bucks on entry that you miss the boat entirely.
The two stocks that I am discussing today are both slightly off of their 52-week highs, and both are rated extremely favorably by the analysts who cover them.
South Jersey Industries (NYSE: SJI) is trading at $53 and yields 2.9%. It has an 8-year history of paying and raising its dividend, and its 5-year annual average dividend growth rate is 10.44%. It is currently trading at 9% less than its 52-week high.
It is covered by 4 analysts, with 3 rating it a “Strong Buy” and 1 rating it a “Hold”, for an overall rating of 1.5 and a mean target price of $60.33. While South Jersey Industries’ dividend-paying history is a little short, the company weathered the financial crisis without cutting it, and its 5-year average growth rate indicates excellent dividends ahead.
SJW Corp. (NYSE: SJW) is trading at $25 and yields 2.8%. It has a 44-year history of paying and raising its dividend, and its 5-year annual average dividend growth rate is 3.46%. It is currently trading at 3% less than its 52-week high.
The company is covered by 4 analysts, with 3 rating it a “Strong Buy” and 1 rating it a “Hold”, for an overall rating of 1.5 and a mean target price of $27.00. While SJW’s annual dividend growth is a little on the low side, it still has an excellent history of maintaining and raising dividends, and deserves inclusion in your considerations.
There are hundreds of stocks that pay dividends, and some pay far more than the ones listed here. But yield should be only one of the factors that you consider when picking dividend stocks. Consistency of payment and opportunity for good dividend growth are also very good indicators of a reliable stock.
In this case, we have two stocks with excellent potential as dividend-payers, combined with favorable company growth prospects: the best of both worlds.
khern0203 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend South Jersey Industries. 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.If you have questions about this post or the Fool’s blog network, click here for information.