Fat Dividends: Some are Iffy, Others are Beauties

September 2nd, 2011
in contributors

dividends-picture by Bill Barnhart, YCharts

With the S&P 500 dividend yield back down to about 2 percent from an upward spike earlier this summer, it’s time to revisit YCharts effort to find “Ridiculous Dividend Yields.” The first installment, July 14, 2011, looked at GPS device maker Garmin (GRMN). In July Garmin’s nearly 5% yield played against worries about its long-term profit outlook now that mobile handheld devices are offering GPS service.

Follow up:

Using the nonscientific ground rules set in July, I updated the YCharts screener tab for stocks more than $1 billion in market cap, dividend yields of 3% or better and revenue growth of at least 10%.

Some dividend yields cited in the Garmin column only got more ridiculous. Garmin fell off the screen, as its yield crept higher but revenue growth turned negative. Casket maker Hillenbrand (HI) saw its yield jump to 8% from just over 3% after revenue growth slid below the 10% benchmark. Nokia (NOK) saw its yield inch toward 8% as revenue growth dropped sharply. Ridiculous dividend yields as warning signs, right.

What the heck – let’s look for stocks paying nice dividends, but leave the ridiculous ones alone for now. Consider three non-financial stocks that pass our screen. They also have the distinction of being S&P 500 dividend “aristocrats,” (the term for S&P 500 companies that have increased dividends annually for at least the last 25 years). They are business services provider Automatic Data (ADP), global electrical equipment maker Emerson Electric (EMR) and paint and specialty chemicals supplier PPG Industries (PPG). All three pay a yield of about 3%, reflecting in part the recent stock market swoon.

PPG Industries Dividend Yield Stock Chart

PPG Industries Dividend Yield Stock Chart by YCharts

All three report solid trends of revenue growth north of 10%.

PPG Industries Revenue Growth Stock Chart

PPG Industries Revenue Growth Stock Chart by YCharts

Looking forward, chances of these companies’ dividend yields dropping below 3% are a lot greater than their revenue growth slipping below 10%. A couple of other companies from the latest “ridiculous” screen deserve a look, non-S&P 500 dividend aristocrats. Annual revenue growth at electronic connecting device maker Molex (MOLX) climbed more than 15% in the fiscal year 2011. The recent dividend yield was 4.5%.

Molex Dividend Yield Stock Chart

Molex Dividend Yield Stock Chart by YCharts

Finally, Peru’s biggest copper producer, Southern Copper (SCCO), with a dividend yield of more than 7.5% and revenue growth of 55%, bears a look. Share prices have declined this year, reflecting anxiety about global copper demand. But the revenue growth curve has tracked closely with fellow copper miner Freeport-McMoran Gold & Copper (FCX), whose yield is just north of 2%.

Southern Copper Corporation Price Stock Chart

Southern Copper Corporation Price Stock Chart by YCharts

Related Articles

Wash, Rinse, Repeat? by David Grandey

August Investment Review by MacroTides

European Banking System on Verge of Collapse by Keith Fitz-Gerald

Is the End Near – Or Is It Different This Time? by Ed Easterling

Gold Trend Lines by John Lounsbury

Do You Want to Ride Through another Bear Market? by MacroTides

It’s Time to Bail on Bank Stocks by Martin Hutchinson

Investing in a Volatile Market by David Grandey

Gundlach Sees Cusp of a Global Banking Panic by Robert Huebscher

Why the U.S. Credit Rating Downgrade Could Cause a Full-Fledged Market Crash by Jason Simpkins

Death of the Risk-Free Investment by Martin Hutchinson

Elliott Waves: Potential High for Stocks and Low for Dollar by Avi Gilburt

Investors: The News is Getting Even Worse by Art Patten

About the Author

Bill Barnhart is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

 navigate econintersect.com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved