by Alyssa Oursler | September 10, 2012 7:45 am
Some businesses deal in products or services that are not very appealing — end of story. They’re the companies that do all the smelly, trashy, dirt-under-your-fingernails kind of work … or at least help consumers do that kind of work themselves.
But a company doesn’t need to spit out sleek, flashy gadgets or make its money in the glass buildings of Wall Street to be a good investment. In fact, if you’re looking for a stock that’ll offer you some long-term security via dividend payments, you just might find some gems by looking under the dirt.
Big names in waste, gardening and other not-so-spic-and-span industries reward investors for their loyalty with respectable chunks of change each quarter. And if that means getting down and dirty, so be it.
Here are five filthy companies to dirty your hands with for sturdy and often sizable dividends:
Dividend Yield: 2.3%
Lowe’s (NYSE:LOW) is home to tools for plenty of sweaty, dirty and outright tough tasks, whether it’s gardening, plumbing, painting, cleaning or landscaping. The company has more than 1,700 stores serving do-it-yourselfers and commercial customers alike.
But Lowe’s isn’t just trusty if your toilet is leaking. It also is an InvestorPlace Dependable Dividend Stock thanks to its history of making consistent payments — and making them bigger. Lowe’s currently doles out 16 cents quarterly, good for a 2.3% yield.
LOW has gained 45% in the past 52 weeks, even though 2012 has been bumpy. But while shares did slide on the heels of the company’s latest earnings report, LOW still is roughly matching the broader markets’ gains year-to-date, thanks in part to a nearly 10% gain in the past month alone as housing news continues to pick up.
Looking forward, the company is expecting five-year growth of more than 15% per year, better than the S&P average of 10%. Earnings growth and dividend growth sounds like a pretty solid foundation for an investment — even if it means lugging around the ol’ tool belt.
Dividend Yield: 2.4%
This construction and mining equipment maker is slightly in the red for the year — putting it in the bottom half of InvestorPlace’s 10 Best Stocks for 2012 standings.
Investors have been hard on the company, which manufactures construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
You wouldn’t know it by its 3% losses since January, but CAT is set to have its best year ever.
Earlier this summer, the Big Cat reported earnings that surged an eye-popping 67% year-over-year, beating Wall Street estimates by a country mile, while revenues grew more than 20%. Of course, top- and bottom-line improvements have been the status quo for Caterpillar, which has seen nine consecutive quarters of earnings growth and 11 straight quarters of earnings growth.
If shares start to reflect that kind of success, the stock is definitely worth plowing into on capital gains alone. Plus, Caterpillar’s estimated five-year growth is even nicer at 17% per year.
Most importantly for long-term investors, Caterpillar (NYSE:CAT) offers a respectable 52-cent quarterly payout yielding 2.4%. Plus, the company has the longest dividend history on this list — CAT has been rewarding investors for almost 80 years and has increased its quarterly checks by almost 45% in the past five years alone.
Dividend Yield: 3%
OK, Scotts Miracle-Gro Co. (NYSE:SMG) admittedly could use some of its own product, at least as far as earnings are concerned — while annual earnings still are on pace to grow from last year’s numbers, they’re still inconsistent on a quarterly basis and well behind 2009 numbers.
However, SMG’s dividend has been blooming relatively steadily for the few years it’s been in season. The company started paying in 2009 and increased its payout by another 8% to 32 cents in the most recent quarter, bringing the yield just over 3%.
Scotts is in the red so far this year, but there are signs that could pick up. Boyar Intrinsic Value Research head Mark Boyar tells Barron’s that the baby boom favors SMG as older folks tend to garden more. Plus, he says there’s a chance the company could again be taken private, and Scotts’ strong business means shares likely would go at a premium.
The recession has been weighing on the company’s success, as the lawn usually gets second billing when families are pinching pennies. But if consumer spending gets back on track — and recent research suggests it’s poised to — expect people to hit the dirt with Scotts products in hand.
Dividend Yield: 3.5%
While there’s no garbage or gardening involved, Philip Morris International‘s (NYSE:PM) products still are a little smelly. Tobacco products can indeed stink up your clothes and hair, even yellow your teeth … but if you’re familiar with the dividend power of tobacco stocks, chances are you’re cool with letting all that slide.
Phillip Morris is the world’s largest tobacco company and sports an addictive 3.5% yield. The company has been making payments since its 2008 spin-off from Altria (NYSE:MO) and has already increased its quarterly payout nearly 70% in that time!
Of course, with stocks like Altria and Lorillard (NYSE:LO) boasting superior yields around 5%, why saddle up with Philip Morris? Growth potential.
PM shares have gained more than 80% since splitting from Altria, beating the rest of its American brethren, and has put up 11 consecutive quarters of earnings growth. And that should continue. While there are questions about the future of cigarettes and other tobacco products because of government regulation and increased awareness of linked health problems, Phillip Morris has a few advantages that offset such uncertainty.
To start, it’s working on adding “lower-risk” cigarettes in the next few years in response to health concerns. And it’s an international business; thus, while the U.S. is cracking down on the industry, Philip Morris still can peddle its wares to less regulated countries across the world. That should help shares keep from just moving sideways, and help PM grow its already attractive dividend.
Dividend Yield: 4.1%
You know what they say: One man’s trash is another man’s treasure.
Our highest-yielding filthy dividend pick is Waste Management (NYSE:WM), the largest waste disposal company in North America.
Besides its hefty payout, the company’s sheer size and business are its biggest assets. Waste Management has a huge network of trash collectors, recycling plants, landfill gas projects and much more. And while the future of cell phones or retail styles might change in the coming years, we can be near certain that we will keep producing plenty of garbage — and will need some place to put it.
It’s fair to point out that Waste Management hasn’t been shining lately. While it boasts 10 consecutive quarters of revenue growth, its gain in the most recent quarter was a mere 3%. And earnings actually took a double-digit hit, making three straight dips.
Still, with gains of just 15% in more than three years, Waste Management shouldn’t be viewed as a growth play anyway, but a consistency play. Investors just need WM shares to tread water to win out. Waste Management has been paying a regular quarterly dividend since 2004, starting at just less than 19 cents and steadily increasing to its current figure of 35 cents, good for a current yield north of 4%.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.
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