by Jim Woods | June 11, 2012 10:50 am
It’s no question that income still is extremely scant. Consider that early this month, the yield on the 10-Year Treasury dipped below 1.5%. That means for the privilege of lending the federal government money for a decade, you will be rewarded with a yield that, when adjusted for inflation, is almost literally zero.
To combat this pitiful circumstance, investors are turning to traditional stocks that historically throw off a lot of cash. High-profile dividend stalwarts such as Johnson & Johnson (NYSE:JNJ), PepsiCo (NYSE:PEP) and Procter & Gamble (NYSE:PG) get a lot of attention from income investors, but these are just some of the stocks delivering attractive yields to shareholders.
Flying under the well-known dividend stock radar are myriad companies that deliver great capital appreciation and solid yield. Of course, income-oriented investors understandably are in search of yield first, then capital appreciation second. But these complementary objectives are all part of what makes a dependable dividend diva.
The following five stocks represent more under-the-radar dividend plays for income investors — plays you can add to these original five dividend divas.
Property casualty insurer Cincinnati Financial (NASDAQ:CINF) isn’t exactly a household name. In fact, it’s not even that well-known in the Buckeye State. However, income investors in the know should be impressed with the company’s 4.4% annual dividend yield.
It also has had an impressive track record, paying dividends every year since 1954, which is just after President Eisenhower took office. Much more recently, the stock has enjoyed a big surge, up 18.9% so far in 2012.
Cincinnati Financial got back on track in 2011, seeing top-line growth of about 3%. That compares very well to the 1% decline it witnessed in 2010, and the whopping 26% plunge in 2009. Although the current low interest-rate environment is challenging for insurance companies such as Cincinnati Financial — as well as competitors such as Assurant (NYSE:AIZ), W.R. Berkely Corp. (NYSE:WRB) and Travelers (NYSE:TRV) — the company has managed to swim upstream and grow its businesses, including growth in its key commercial insurance business. If this trend continues, shareholders can expect an even bigger yield from this under-the-radar dividend diva.
Lab and life sciences firm Sigma-Aldrich (NASDAQ:SIAL) is on a roll. The company recently reported record sales that were 5% higher year-over-year. Growth in its Research Chemicals division was largely responsible for the record metric.
Sigma-Aldrich is one of those companies that make products used in medical testing by just about every life sciences lab around, but because it doesn’t sell directly to the public, it’s also likely you’ve never really heard of it. And although Sigma-Alrdrich has been paying dividends since 1970, it still also flies under the dividend stock radar. That’s because at an annual yield of 1.1%, SIAL shares don’t necessarily scream to income investors, but the company’s year-to-date return of 11.9% that should have shareholders smiling.
A big driver of growth going forward for Sigma-Aldrich will be its expansion into emerging markets such as China, India and other Asian nations. The company has its sights set on growth in these burgeoning regions, and if successful, SIAL shares could continue delivering great fiscal test results for another several decades.
Like Sigma-Aldrich, Ecolab (NYSE:ECL) is a company with a huge opportunity to expand its already substantive business in emerging markets such as those in China, India and other Asian nations. The company has carved a great niche in the commercial cleaning and sanitation industry — a business that has kept its business expanding at a 10% clip during the past five years. Revenue also is growing; Ecolab has seen a jump of more than 30% in the past year. Metrics such as gross margins also are stellar at nearly 48%.
On the dividend front, the company has grown its payout by nearly 12% annually over the past five years. It also has been a long-term dividend diva, pumping out payouts to shareholders since 1936. Ecolab’s dividend yield is 1.2%, which is solid if not stellar. Year-to-date, ECL shares are up 13.9%. The combination of yield and upside, along with the company’s future growth prospects, make this stock a great addition to any income watch list.
Paint maker Sherwin-Williams (NYSE:SHW) is perhaps one of the more well-known stocks on our under-the-radar list, as the company has been helping homeowners apply a fresh coat of color on their homes since the 19th century. It also has been painting shareholders’ portfolios with dividends every year since 1979.
Sherwin-Williams enjoyed a very strong first quarter, as the company reported a 51% year-over-year jump in earnings. Net sales also grew by an impressive 15%, as higher paint volume and higher paint prices teamed up to brighten the company’s fiscal room.
The company’s shares offer investors a 1.2% annual dividend yield, but the real attraction here is the share price appreciation. So far in 2012, SHW has spiked 47.1% — a truly remarkable performance for a company that trades at a forward P/E of about 21. Income investors who want to remodel their portfolios with stocks that are consistent dividend payers, and that also have stellar price appreciation potential, should consider brushing SHW shares on their personal dividend radars.
As baby boomers age, they need more and more medical care. That might not be good for those of us born between 1946 and 1964, but it is good for companies such as C.R. Bard (NYSE:BCR), which designs, manufactures and distributes a variety of medical, surgical and diagnostic devices. The company has been rewarding shareholders with a solid dividend since 1960, with an annual dividend yield of 0.8%.
That’s not a huge yield by any means, but keep in mind that the stock also offers great price appreciation, as BCR shares are up 15.7% year-to-date.
C.R. Bard recently bested earnings for the first quarter, and though revenues increased, they did fall shy of expectations. The company has a strong pipeline of new medical devices coming to the market, including the Fluency Plus stent grafts and Denali vena cava filters. Of course, it’s not the only firm in this sector. The company faces strong competition from Boston Scientific (NYSE:BSX) and AngioDynamics (NASDAQ:ANGO). Yet despite other successful firms in the space, C.R. Bard has carved out a big slice of the medical device market — a market that’s only going to get bigger as boomers age.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.
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