Four Dividend All-Stars Going Ex-Dividend in February

Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

I’ve been analyzing and writing about dividend companies for over six months, looking to build what I believe is the best Dividend Portfolio. I developed a complete ratings system, through which I assign scores to a company based on seven separate criteria I have chosen to represent superior dividend-paying potential, as well as possible gains in share price.

So far I have selected seven companies for my Portfolio. I continue to examine dozens of companies every week.

The companies on this list are not the ones that are going to form the foundation of my dividend portfolio. They have not been paying and raising dividends for 10 years or more, which is the minimum that I am permitting for the ten base stocks in my model portfolio. However, these are stocks that have been raising their distributions for at least five years, and they may merit a spot as part of the higher-risk, higher-reward section of my portfolio once I have the base in place.

I examined over 100 stocks that are going ex-dividend in February, and found four stocks that have been paying for more than five years, are yielding more than 3% and have returned more than 16% (the current 52-week return of the SPY ETF) in the past twelve months.

I examined each company’s yield, total 52-week return, where it is trading relative to its 52-week high and low, and its recent dividend-paying history in order to project its ability to continue.

I present these four companies, in order of ex-dividend date:

Health Care REIT (NYSE: HCN) is a real estate investment trust (REIT) involved primarily in senior living and health care properties.

HCN is currently trading at $63 per share and yields 4.8%. It has been raising dividends for five years and is trading at its 52-week high (I include this information because some investors prefer to buy a stock on a pull-back from its high). The company is up 9.6% since this time last year.

As a REIT, HCN is legally obligated to pay out 90% of its income yearly. The current FY2013 analyst earnings estimate is $3.89 per share. The forward-looking annual dividend is $3.06, or 79% of the earnings estimate.  The company’s five-year dividend growth rate is 3.0%.

Health Care REIT went ex-dividend on Feb. 1 and will pay a dividend of $0.765 per share on Feb. 20.

Magellan Midstream Partners (NYSE: MMP) is a Master Limited Partnership (MLP) and as such its investors enjoy the extremely attractive tax-deferred benefits of investing in such a vehicle. MMP is currently trading at $50 per share and yields 4.1%. It is trading at its 52-week high, and has returned 53.5% since last year.

Magellan Midstream Partners has been paying and raising distributions consistently for 11 years. Its 5-year dividend growth rate is 9.2%. Magellan went ex-dividend on Feb. 4 and will pay a dividend of $0.50 per share on Feb. 14.

CMS Energy Corp. (NYSE: CMS) is an electric and gas utility corporation operating primarily in Michigan.

CMS is currently trading at $26 per share and yields 3.8%. It is trading at its 52-week high, and the share price is up by 16.6% over the past twelve months.

CMS Energy has been raising its dividend for five years, and its payout ratio is 69.5%. Its five-year DGR is 38.5%. The stock goes ex-dividend on Feb. 6 and will pay a dividend of $0.255 on Feb. 28.

Sunoco Logistics Partners (NYSE: SXL) is another MLP in the Oil and Gas Pipeline industry. This company has already been added to my Dividend Portfolio.

SXL is currently trading at $60 per share and yields 3.7%. It is trading at its 52-week high of $35.77, and the share price is up by 64.6% over the past twelve months. Sunoco Logistics has been increasing its dividend for 10 years, and its 5-year DGR is 14.0%.

The stock goes ex-dividend on Feb. 6 and will pay a dividend of $0.545 on Feb. 14.

Sunoco Logistics already made it into my portfolio with an overall score of 18 points (the companies that have been added so far range from 18 to 20 points on my scoring system.)

At this point I am not prepared to add any additional high-risk but high-reward companies to my dividend portfolio, since I am not yet finished building the base. If I were to have my foundation in place already, though, I would definitely consider the remaining three companies on this list. These three companies represent what I feel is a fair risk-reward basis in terms of a dividend-paying company. They may merit a small position in your portfolio.

khern0203 is long SXL. The Motley Fool recommends Health Care REIT and Magellan Midstream Partners, L.P.. 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!

blog comments powered by Disqus