High Dividend Growth Stocks In 2015

by Robert Hauver
Looking for the sweet spot between dividend growth and dividend yield? We parsed the data from S&P 500 dividend stocks through April 30, 2015, to find out which dividend stocks have had strong dividend increases in 2015.
Sector-wise, Consumer Discretionary and Tech S&P 500 stocks had the best combination of overall performance and dividend increases. Even though Healthcare has been the leading sector for ages, it’s not known for having a lot of dividend paying stocks. In addition, this sector’s dividend increases haven’t kept pace with its rising share prices, which has also contributed to a lower overall dividend yield.
SCTRS-DIVYIELD-5-26-15
We found 3 prospects which had a good combination of dividend yield and dividend increases in 2015.
Click here to read more…

Copyright 2015 DeMar Marketing All Rights Reserved

How To Buy This Blue Chip Dividend Stock 9% Below Its 52-Week Low

by Robert Hauver

One of the world’s most venerable blue chip dividend stocks, International Business Machines, (IBM), has gotten hammered by the market, since hitting a high of over $213.00 in March, and is now very oversold:

IBM-CHART8-23-13

IBM’s disappointing second quarter 2013 earnings report in late June didn’t help matters – sales and earnings were both down. One bright spot was that estimated services backlog at June 30 was up 3% year over year.

IBM-Q2-13QTR

Earnings Forecast 2013-2014: The average analyst EPS growth forecast for IBM in 2014 is currently 8.52%, giving it a 1.46 2014 PEG value, so we can’t say it’s undervalued on a growth basis:

IBM-AUG-PEG

However, on a P/E and Price/Sales basis, it does look cheaper than its Industry’s averages. Part of IBM’s problem has been the slowdown in Europe, but, it looks like that area may finally be pulling out of its recession in the next few quarters.

IBM-AUG-PB

Dividends: IBM has had a good dividend growth rate over the past 5 years, and increased its quarterly dividend again in May, to $.95, from $.85.

IBM-AUG-DIV

Thinking long term: Is a dominant company like IBM going to fade away? We don’t think so. Neither does Mr. Long Term himself, Warren Buffett- he’s a major buyer of IBM, having bought shares since Q3 2011, through Q2 2013. IBM is now Berkshire Hathaway’s 3rd largest holding, at 14.62% of its portfolio.

How to play it safe with long-term put options: If you’re leery of IBM falling further, your best bet may be to sell cash secured put options below IBM’s share price. We’ve laid out a January 2015 put trade below, which gives you a breakeven cost of $166.40, which is over 9% below IBM’s 8/23/13 share price of $185.16. The Jan. 2015 $185.00 put option pays well over 3 times what IBM’s dividends will pay over the next 17 months. (Please note that, unlike covered call sellers, 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:

IBM-AUG-PUT

We also list a covered call trade for IBM, along with over 30 other covered calls trades, in our free Covered Calls Table.

Financials: Thanks to its ongoing stock buyback program, IBM has a very high Return On Equity ratio of over 83%. Its Operating Margin is also much higher than industry averages. It carries more debt, but it has a strong Interest Coverage figure of 41.85:

IBM-AUG-ROE

Performance: IBM is just 1.43% over its 52-week low, as of 8/23/13. As we’re heading into the market’s weakest months, Sept. and Oct., it may go lower, and offer even more compelling, higher put-selling yields and lower long term breakevens.

IBM-AUG-PERF

Author: Robert Hauver, copyright 2013 DeMar Marketing, All Rights Reserved.
Disclosure: Author was short IBM put options at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

How To Grab A Fast Double-Digit Yield From This Dow Dividend Stock

by Robert Hauver
Dow dividend stock IBM, (IBM), is going ex-dividend next week, on 5/8/13:
IBM-DIV
IBM dipped below $200.00 again today, 5/1/13, which sets up a high yield, short-term covered call trade:
IBM-CALL

There are 3 potential income scenarios to this 2-week trade, all of which pay you at least a $2.08/share call option premium:
1. Static – IBM’s share price isn’t above $200.00 at or near expiration, and your IBM shares don’t get assigned/sold. You receive the $2.08 call premium and the $.95 dividend.
2. Assigned before the ex-dividend date- IBM’s share price is above $200.00 before 5/8/13, and your IBM shares get assigned/sold. You receive the $2.08 call option premium, and the price gain of $.37, but not the $.95/share dividend.
3. Assigned after the ex-dividend date- IBM is above $200.00 after 5/8/13, and your IBM shares get assigned/sold on or near the 5/17/13 expiration date. You’d receive the $2.08 call option premium, the $.95/share dividend, and the price gain of $.37:
IBM-CALLINC
You can see more details for this and over 35 other high yield options trades in our free Covered Calls Table.

Cash Secured Puts: We also list a short term put-selling trade for IBM which offers a 13.5% annualized yield, in our free Cash Secured Puts Table.

Earnings: IBM got beaten up after its most recent quarterly earnings report disappointed – revenue fell 5%, and diluted normalized EPS fell 7.2%. However, the 15% earnings estimates for 2013 are still strong enough to give it an undervalued 2013 PEG ratio:
IBM-PEG
Financials: Although it has more debt, IBM’s Mgt. Efficiency ratios are very superior to its peer industry’s averages. This cash cow also has an Interest Coverage ratio of over 35., and also has a 5-year Dividend Growth Rate of over 17%.
IBM-ROE
Other Valuations: Like many Dow dividend stocks, IBM commands a premium Price/Book value vs.its peers:
IBM-MKTCAP
Disclaimer: This article was written for informational purposes only and is not intended as investment advice.
Disclosure: The author was short IBM put options at the time of this writing.

3 Large Cap Tech Dividend Stocks With Double Dividends

By Robert Hauver

Searching for undervalued dividend paying stocks with strong growth?  The Tech sector offers some of the best stocks to buy in 2012 for growth and dependable income. The cash-rich Tech sector gained just 1.03% in 2011, in spite of sector earnings growing by over 18%.  However, Standard & Poors is projecting the Tech sector to achieve the largest 2012 EPS increase, and Tech’s P/E is also currently below its 4-year average:

SP-SECTOR-EPS

(Data Source: Standard & Poors)

3 Large Cap Tech Dividend Paying Stocks – Although Tech isn’t normally known for high dividend stocks, there are now dependable dividend stocks in this sector, including these iconic firms, all of whom sport low dividend payout ratios. Better yet, their dividend growth rate is on the rise – all 3 companies had big dividend increases in 2011-  MSFT: up 25%; INTC: up 16%; IBM: up 15%.

ibm-INTC-MSFT-DIVS

Covered Calls: Want to double or triple your dividends? Selling covered call options is a strategy that allows you to vastly improve upon the dividend yields of a stock. These 3 trades have call options that pay from 3 to 11 times what the dividends pay during their approx. 3-month terms. (All options mentioned in this article expire in April 2012.)  Another bonus is that you receive your option premium $ within 3 days of selling a put or call option. In fact, many brokers, such as Schwab, credit your account the same day.  The covered call strategy also helps you to hedge gains in a stock that you own, as we’ve detailed in previous articles. This strategy is also used for locking in income and/or lowering risk when buying new stocks.

You can find additional details on over 30 high yield Covered Calls trades we’ve discussed in our recent articles in our Covered Calls Table.

IBM-INTC-CALLS

Cash Secured Puts: Selling cash secured puts below or close to a stock’s current price is an alternative strategy to use, if you want to buy shares below the current market price, and have a lower break-even cost.  Your break-even is the difference between the put premium and the put strike price. In the table below, the break-even for MSFT is $23.65, which equals the $27.00 Put Strike Price, minus the $1.10 Put Bid Premium.  As with the call options, these April put options pay many times over what the quarterly dividends pay.

(Note: You can find more info on over 30 high yield Cash Secured Puts trades in our Cash Secured Puts Table.)

IBM-INTC-PUTS

Valuations: MSFT and INTC both currently have P/E’s close to their 5-year low P/E’s.

INTC, however, recently warned that their 4th quarter revenue and earnings will be negatively impacted by the floods in Thailand: “The company now expects fourth-quarter revenue to be $13.7 billion, plus or minus $300 million, lower than the previous expectation of $14.7 billion, plus or minus $500 million. Sales of personal computers are expected to be up sequentially in the fourth quarter. However, the worldwide PC supply chain is reducing inventories and microprocessor purchases as a result of hard disk drive supply shortages. The company expects hard disk drive supply shortages to continue into the first quarter, followed by a rebuilding of microprocessor inventories as supplies of hard disk drives recover during the first half of 2012.” (Source: Intel website)

Will Intel regain these lost sales in the second half of 2012? Even with the supply issues, he current estimate of under 1% 2012 growth for Intel seems very low, especially since Intel has traditionally been very conservative in its earnings projections, and had 4 consecutive quarterly upside earnings surprises in 2011.

IBM’s new CEO, Ginni Romett, has already made a new acquisition, buying cloud software testing firm Green Hat.  IBM also had 4 2011 consecutive earnings surprises, (low single-digits), while Microsoft had 3 much larger ones, (approx. 9% to 19%).

IBM-INTC-PEG

Financials: Although IBM carries the highest debt load, but they earn enough $ to cover their interest payments by 53 times – quite a cash machine, to say the least.

IBM-INTC-ROE

Performance:  IBM and Intel both outperformed the Tech sector in 2011, but MSFT got no respect.  However, MSFT is up the most so far in the first few days of 2012:

IBM-INTC-PERF

Disclosure: Author is long INTC and IBM shares, and short INTC calls at the time of publication.

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

Author: Robert Hauver © 2012 Demar Marketing All Rights Reserved