These 2 High Dividend Stocks Go Ex-Dividend Next Week

Posted on April 25, 2013

by Robert Hauver

There are 2 dividend stocks from our High Dividend Stocks By Sector Tables, which go ex-dividend on 5/1/13: Calumet Specialty Products Partners, LP, (CLMT), and PAA Natural Gas Storage, (PAA).

CLMT is a refiner and processor of specialty hydrocarbon products, and operates six plants including operations in Northwest Louisiana, Pennsylvania, Texas and Illinois.

PAA’s business consists of the acquisition, development, operation and commercial management of natural gas storage facilities. Although PAA is listed as a Gas Utility stock on financial websites, it’s actually more of an Energy-related stock.

PAA owns and operates 3 natural gas storage facilities located in Louisiana, Mississippi and Michigan. PAA’s customers include electric utilities, local distribution companies, pipelines, natural gas producers, LNG importers, aggregators, marketers, and industrial and commercial end use customers.

Valuations: Both of these stocks are closer to the low end of their 5-year P/E range – (PNG went public in 2010, so there’s less history for it than for CLMT.)

Dividends: CLMT has a very impressive 51% dividend growth rate over the past 5 years, having raised its quarterly distributions from $.45 in 2008-2009, up to the current new $.68 payout. In fact, CLMT’s frequency of rate hikes has also increased – they raised their distributions 3 times in 2011, and 4 times in 2012, and just raised it again in the 1st quarter of 2013, to $.68 from $.65. After its 2010 IPO, PNG raised its distribution from $.21 to $.34, and then from $.35 to $.36 in 2011, where it remains currently:

Performance: Both stocks have had a strong run over the past year, especially CLMT.

Options: Although both stocks have options available, at present CLMT’s are much more compelling, particularly its cash secured puts. This strategy would make sense in light of the 93% price gains CLMT has had. This put trade offers you a 15%-plus annualized yield, and a breakeven that’s 11.55% below CLMT’s share price.

You can see more details on this and over 35 other high options yields trades in our free Cash Secured Puts Table.

If you’re also interested in selling Covered Calls, we maintain a free Covered Calls Table, which also has over 35 high yield trades.

Financials: Except for its heavier debt load, CLMT’s ratios look stronger vs. its industry than PNG’s do. CLMT has an Interest Coverage ratio of 1.64. PNG has a much higher Operating Margin than its peers, and most of its ratios are in line with its industry’s averages:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author had no positions in CLMT or PNG at the time of this writing.

Can This High Dividend Stock Maintain Its 18% Dividend Yield?

Posted on April 10, 2013

by Robert Hauver

Looking for high dividend stocks? Our search for interesting dividend stocks has uncovered a refining/retailing/pipeline stock with one of the highest dividend yields in the market: Northern Tier Energy, (NTI), is a combination refining/retailing company, based in St. Paul, Minnesota, near the booming Bakken shale play in the Midwest.

NTI’s ability to source Bakken light sweet crude and Western Canadian heavy crude, gives it a big advantage as a refiner, since both of these sources are cheaper than West Texas Intermediate crude. NTI owns one of only two refineries in Minnesota and one of four refineries in the Upper Great Plains area within the PADD II region.

In addition to refining, NTI also has a ready sales outlet for its refined products, as it owns 166 convenience stores under the SuperAmerica brand and also supports 68 franchised convenience stores, mainly in Wisconsin and Minnesota. NTI also owns various storage and transportation assets, including a light products terminal, a heavy products terminal, storage tanks, rail loading/unloading facilities and a Mississippi river dock.

The refining business also includes a 17% interest in the Minnesota Pipe Line Company, which owns and operates the Minnesota Pipeline, a 455,000 bpd crude oil pipeline system that transports crude oil (primarily from Western Canada and North Dakota) for approximately 300 miles from the Enbridge pipeline hub at Clearbrook, Minnesota to the refinery. The Minnesota Pipeline has historically transported the majority of the crude oil used and processed in the refinery. (Source: NTI website)

Dividends: Since its IPO in July 2012, NTI has paid 2 distributions: $1.48 on 11/29/12, and $1.27 on 2/28/13. Projecting their most recent $1.27 distribution forward for 3 more quarters gives NTI a very high dividend yield of 18.55%!

Here’s the million $ question: Will NTI maintain this level of dividends? The following may offer a clue for the upcoming May distribution:

In the 1st quarter of 2013, the avg. retail gasoline price was $3.55, better than 4th quarter 2012. If you use 37% as a projected ratio of distribution paid to avg. retail gasoline price, this would indicate a potential May payout of $1.31. Of course, this is a very rough estimate, and it could be derailed by other factors – NTI’s refining margins may have shrunk in the 1st quarter, or mgt. may decide to utilize more of its cash for infrastructure expansion investments. NTI stated in a recent investor presentation that it “plans to invest in logistics operations targeting trucking, terminal and pipeline assets.”

Given this uncertainty, and NTI’s big 88% rise since its IPO, what should you do?
Options: Here’s what we did, (so far). We sold puts below NTI’s share price, to lower our breakeven, in case the stock price falls, if NTI cuts its May distribution. This trade projects the same quarterly distribution of $1.27 in May and August. Coincidentally, the Sept. 2013 $25.00 put pays $2.50, which nearly matches this projected payout. (Note: put sellers don’t receive dividends.) You can find more details on this and over 30 other put trades in our free Cash Secured Puts Table.

Covered Calls: Alternatively, you could buy NTI and sell covered calls to hedge your bet. This would pay you less option $ up front, but allow you to participate in future distributions and potential price gains.
This trade, from our Covered Calls Table, offers a $1.60 call premium, plus the potential for $2.61 in price gains, ($30 call strike minus $27.39 share price). You’ll also receive NTI’s next distributions, unless NTI rises above $30 before the ex-dividend dates, and your shares get assigned/sold. NTI should announce its next distribution sometime around May 13th.

Earnings: NTI looks very undervalued on a 2013 PEG basis, but analysts are projecting much less growth for 2014. However, given its ability to pay very attractive distributions thus far in its short history, even if NTI just keeps its yield in the “double-digit realm”, its dividend yield should continue to attract investors, and support its share price in the future.

Financials: NTI’s ratios look better than its peers so far. It does carry more debt, but it has sufficient Interest Coverage and a strong Current Ratio:

Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short NTI put options at the time of this writing.

The Strongest Dividend Growth Sector In 2012

Posted on November 29, 2012

by Robert Hauver

Up until the 2008 market crash, the financial sector was one of the dividend kingpins of the S&P 500, contributing over 20% of all dividends for the index. However, in 2009, this sector’s contribution shrank to only 9%, and even dipped below that in 2010. In 2012, the financial sector has contributed 12.54% thus far.

Meanwhile, the tech sector has kept expanding its amount of dividend paying stocks, which now stands at 56% and has the largest contribution of dividends to the S&P 500 in 2012:

Which tech firms represent these new dividend stocks? We’ve listed below the four new payers for 2012, and then the stocks with the highest dividend increases:

Click to enlarge images.

Here’s how these stocks compare for earnings growth, ranked by estimated PEG for their next fiscal year:

As is often the case, Apple (AAPL), by virtue of its low P/E and strong growth, is at the top of the list. However, Visa (V) is also an interesting growth story due to its 2012 earnings being skewed downward by a big one-time litigation settlement.

On an adjusted basis, Visa’s P/E is around 23.66 vs. the 46- 79 range some of the financial websites are reporting. In addition, unlike Nvidea (NVDA), which has underperformed in 2012, Visa has a strong defensive element — it has done well in rallies and in pullbacks:

Options:

With its 44% gain this year, you may want to wait for Visa to dip in price before diving in. At present, it looks overbought on its stochastic chart.

An alternative strategy for capitalizing on the next price dip would be to sell cash secured puts below Visa’s stock price, which will offer you immediate income and a lower breakeven price. Here’s a comparison of two put trades for Visa, which illustrates the difference in actual put option premium money received, their respective annualized yields, and breakevens.

You can find more info on these and over 30 other trades in our Cash Secured Puts Table:

Disclosure: I’m long V, via being short V put options.

Disclaimer: This article was written for informational purposes only and isn’t intended as investment advice.

2 Top Defensive Dividend Stocks

Posted on October 12, 2012

by Robert Hauver

October 12, 2012

With many market observers wondering how long the summer/fall rally will last, we went looking for dividend paying stocks that outperformed the market during the spring pullback AND have also participated in this rally. Not surprisingly, we came up with 2 Utilities stocks, American Electric Power, (AEP), and Next Era Energy, (NEE). Next Era, based in Florida, was formerly known as FPL, (Florida Power & Light).

Both of these stocks are listed in the Utilities section of our High Dividend Stocks By Sector Tables.

Here’s how these 2 electric utilities stocks have performed as of 10/11/12, in both up and down markets. NEE did the best during the pullback, actually rising 4.69%, while AEP only fell -1.18%, while the S&P fell nearly 10%. AEP has reversed itself during the rally, rising over 14%, while NEE has risen 7.57% to date. As the table below shows, they both have risen double-digits on a Pullback vs. Rally net basis, while the S&P has risen just over 2% during the 2 periods:

Dividends: Both stocks pay quarterly dividends, and have increased them over the past 5 years. AEP’s dividend has grown from $.41 in 2007 to the current $.47 quarterly rate, while NEE has done much better, climbing from $.41 all the way up to $.60, a nearly 33% dividend growth rate:

Earnings Growth: As with most Utilities stocks, these aren’t big growth stories, since much of their earnings is regulated, but both firms are at least showing some growth for the past and future, although NEE’s EPS stumbled -3.14% in 2011:

Financials: Both firms have superior Management Efficiency Ratios and Operating Margins vs. their industry. They both carry a higher debt load than the Industry average, but they also have higher Interest Coverage Ratios:

Disclosure: Author held no AEP or NEE shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Diebold – This Solid Dividend Stock Just Sent A Buy Signal

Posted on September 27, 2012

by Robert Hauver

It’s often been said that “timing is everything”, especially when buying stocks. We went looking for solid dividend paying stocks which might be on the verge of rising. We came up with Diebold, (DBD), which just crossed above the oversold line on its stochastic chart, an event which is seen as a buy signal by technical traders:

Company Profile: 150 years old, and based in Ohio, Diebold is a leading global supplier of ATMs, and holds the leading market position in many countries around the world. Diebold also provides security and facility solutions, software solutions, and cross-disciplinary functions which include both hardware and software capabilities, and provides professional and managed services, transaction processing, and security services. Diebold’s primary customers include financial institutions, as well as government agencies, commercial enterprises and various retail outlets. (Source: Diebold website)

Diebold hit its high for the year, at $42.25, back in April, and has struggled since, falling to the mid-30′s in the Spring pullback, and hasn’t participated much in the summer/fall rally until recently. However, it’s up over 2.5% over the past trading month.

Earnings Growth: After bottoming out with a -$.31/share loss in 2010, DBD came roaring back in 2011, and is estimated to grow over 15% in 2012. Analysts’ 2013 earnings estimates range from $2.65 to $3.00 for 2013, which gives DBD a higher 1.27 2013 PEG ratio.

However, DBD just beefed up its operations in Brazil, by acquiring GAS Tecnologia, a leading Brazilian Internet banking, online payment and mobile banking security company. It serves many of the country’s leading financial institutions and protects nearly 70 % of Internet banking transactions in Brazil. Internet banking services only cover about 30% of the transactions within Brazil currently, and are projected to double every 3 years.

Dividends: DBD has an impressive 5-year dividend growth rate of over 19%, and increased its quarterly payout to $.285 in the 1st quarter of 2012, from $.28:

Options: If you want to improve upon DBD’s dividend yield, there are reasonably attractive call options available. Here’s a trade from our Covered Calls Table, that offers an option premium which pays over 3 times DBD’s quarterly dividends between now and February expiration.

The minimum income you’d receive in this trade is $2.81/share, ($1.70 in call premiums, plus $1.11 in assigned price gain, if DBD rises over $35.00, and your shares get assigned before you receive either of the 2 quarterly dividends. The maximum income you’d receive is $3.37, if you receive both dividends, AND your shares are assigned. However, it’s more likely that, if your shares got assigned, after receiving the first $.28 dividend, you wouldn’t receive the second one, since DBD’s ex-dividend date may fall on February 15th, the same day as this option expires. Hence, you’d earn $3.09, a 9%-plus yield over this 5-month term:

Diebold also has put options available, but the premiums aren’t that compelling at present. (You can find over 30 high yield trades in our Cash Secured Puts Table.)

Financials: Diebold has an impressive ROE, but does carry a bit more debt than industry averages. However it has an 8.3 Interest Coverage ratio.

Disclosure: Author held no DBD shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

This Hot High Dividend Stock May Still Be Undervalued

Posted on September 14, 2012

by Robert Hauver

Our quest for undervalued high dividend paying stocks keeps leading us back to the Energy sector, which took a beating in the second quarter, but has come back strong since late June. In a previous article, we wrote about Pioneer Southwest Energy, (PSE), an energy stock which had been left behind in the summer rally.

This article focuses on Calumet Specialty Products Partners, (CLMT), an LP which is a combo oil & gas processor/refiner. With its 8%-plus dividend yield, CLMT is listed in our High Dividend Stocks By Sector Tables. Unlike PSE, CLMT hasn’t been left behind this summer, and has greatly outperformed the S&P since late June. It also looks closer to being overbought than oversold on its stochastic chart:

Undervalued Thesis: Thanks to a series of acquisitions, CLMT had great growth in 2011, and thus far in 2012, with 2012 EPS estimated at $3.34 on average, a torrid 151% pace. Its long-term 5-year growth projection of 26.81% gives it a very low 0.36 PEG:

Here’s the rub – analysts are currently estimating a -3.89% downturn in EPS for 2013:

But analysts may be underestimating the 2013 earnings impact of CLMT’s acquisitions, if the last 2 quarters are any harbinger of what’s to come. CLMT earned $0.97 in the first quarter, and increased to $1.14 in the 2nd quarter of 2012, an approximately 87% to 100% increase over the previous year’s quarters.

So, if CLMT matches the lower, $.97 1st quarter figure over the next 2 quarters, it would earn $4.05 in 2012, and probably even more in 2013, since it has made more acquisitions since the 2nd quarter, which will be accretive to earnings:

(Source: Yahoo Finance)

Using a risk-adjusted discounted rate of 8.37% vs. future earnings also shows CLMT to be undervalued, with a whopping value of $132.97.

Dividends: After paying its first 2 quarterly distributions of $.63 in 2007, CLMT’s payout slipped to $.45/quarter in 2008-2009, but has increased steadily ever since – $.46 in 2010, form $.47 up to $.50 in 2011, and from $.53 to $.59 in 2012.

Even though it still looks undervalued on a long term basis, given the big run that CLMT has had…

You may want to wait for a pullback, or, alternatively, sell Covered Calls, to achieve a lower break-even cost.

Here’s a trade for CLMT from our Covered Calls Table, which lists 30 other high yield trades:

This 5-month trade offers a few different income scenarios:

1. Static – Maximum income of $2.48, (dividends and call premium), if CLMT doesn’t rise above the $30.00 call strike price near its ex-dividend dates, or at expiration.

2. Assigned – Minimum income of $2.15, ($.85 price gain + call premium), if CMLT does rise above the $30.00 call strike price near its first ex-dividend date, and your shares are assigned. Maximum income of $3.33 if CMLT gets assigned at expiration, AND you collect both quarterly $.59 dividends.

CLMT also has put options available, but the only high yield is on a $30.00 strike price, which is above the current price/share.

Financials: CLMT has good Mgt. Efficiency ratios, but does carry more debt than industry averages. However, it has 4.1 Interest Coverage Ratio. Its Operating Margins should improve, as it integrates its acquisitions.

Company Profile: Calumet is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial, and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana and has nine facilities located in northwest Louisiana, northwest Wisconsin, western Pennsylvania, southeastern Texas and eastern Missouri. (Source: Calumet website)

Disclosure: Author had no positions in any of the stocks mentioned in this article at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Cisco – A Tech High Dividend Stock That’s Still Undervalued

Posted on August 16, 2012

by Robert Hauver

After getting bashed in the 2nd quarter, Cisco Systems, (CSCO), stock has done well this summer, gaining over 17% since the June lows. CSCO is also one of the top 4 DOW 30 performers over the past trading month, gaining 6.90%, and trailing only HD, CAT, and IBM, which leads the DOW pack with an 8.49% gain. Even with its big summer gains, CSCO still trails the market year to date:

Thanks to a stronger fiscal 4th quarter earnings report, in which adjusted EPS rose 18% vs. fiscal Q4 2011, Cisco’s full year 2012 EPS growth also looked good. In fact, one could argue that CSCO is still undervalued on a 2012 PEG basis. Looking forward, the consensus for 2013 calls for 10.81% EPS growth, which puts CSCO a bit over the 1.00 PEG threshold for being undervalued.

However, using the consensus future earnings growth rate of 8.09%, with a risk-adjusted 10.41% discount rate, shows CSCO’s estimated value to be approximately $23.25, indicating that CSCO is currently undervalued by well over 20%.

Dividends: After having joined the universe of dividend stocks in 2011, CSCO is now approaching the arena of Tech high dividend stocks. CSCO just ratcheted up its quarterly dividends big time, by announcing a huge 75% increase, going to $.14, from $.08. This is the second increase in 2012 – CSCO increased its dividend in the 1st quarter to $.08, from its initial $.06 payout. This new higher dividend payout ups CSCO’s dividend yield significantly, to just below 3.00%, which is in the higher range for most Tech stocks:

Options Outlook: If you’re interested in pumping up CSCO’s dividend yield even further, you can gain additional immediate income via selling covered calls. Since the $19.00 call strike price is only $.13 above CSCO’s mid-day $18.87 price, it appears that you would risk having your CSCO shares assigned/sold before you collect one or both of the $.14 quarterly dividends before the Jan. 2013 expiration.

However, your Assigned compensation would be much more than the dividends anyway: $1.11 in call premium now, plus $.13 in assigned price gain, for a net gain of $1.24, a 6.57% gain. If your shares were assigned near the October ex-dividend date, in under 2 months, this would equal a 39%-plus annualized yield approximately. Conversely, if your shares are never assigned, the minimum yield you’d make would be a 17.57% annualized static yield.

You can see more info on over 30 other call trades in our Covered Calls Table:

Here’s a look at where CSCO is at price-wise over the past 52 weeks. With a very strong relative strength of 72.39, you certainly can’t say that CSCO is oversold:

Cash Secured Puts: Given CSCO’s recent big rise, a cautious way to still profit would be to sell cash secured put options. This January 2013 put gives you a break-even price of $17.52, in addition to offering an annualized yield of over 18%, over 5 times the dividend amount.

You can see more info on over 30 other call trades in our Covered Puts Table:

Financials: As Cisco is such a dominant player in its industry, industry comps are a bit dicey. However, these comps do include other large firms that compete with Cisco in certain areas, such as Juniper, (JNPR), Alcatel-Lucent, (ALU), and Hewlett Packard, (HPQ):

Disclosure: Author was long CSCO shares and short CSCO puts at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Cummins Is Bouncing Back But Is Still Undervalued

Posted on August 3, 2012

by Robert Hauver

If you’re looking for dividend stocks that bounce back and forth in a trading range, Cummins may be one of the best stocks to buy or trade for this attribute.

Cummins, (CMI), had a rough time after lowering its 2012 revenue forecast on July 10th, down to flat, from a previous 10% estimate. CMI shares reached as low as $82.20, but since then, have rallied nearly 18%:

Click here to read more…

Disclosure: Author was short CMI put options at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Standard Motor Parts Has Very High Options Yields

Posted on July 20, 2012

Standard Motor Parts, (SMP), had been beaten up after its disappointing 2nd quarter earnings release on May 3rd, but the market has gotten much more revved up about this Industrial dividend stock this summer. SMP received an analyst upgrade in early June, which certainly helped its share price:

Maybe this is why – even after its recent price gains, SMP still looks very undervalued on PEG basis.

Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Worthington Industries Is On A Roll

Posted on July 13, 2012

by Robert Hauver

Looking for dividend stocks with market support?

Steel and Metal processor Worthington Industries, (WOR), has been on a roll since the June 4th lows, rising over 42%, vs. the S&P, which has gained approx. 6%. This dividend stock has done better than the Steel & Iron industry, which is up approx. 4% since June 4th, but is still down 9% for the year, vs. WOR’s big 36.72% gain:

Earnings Growth: A big part of the attraction for WOR stems from its EPS growth figures, which show it to still be undervalued on a PEG basis for next year’s earnings: Click here to read more…

Disclosure: Author had no positions in WOR at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.