3 High-Growth Stocks with Fat Dividends

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Financial GrowthEveryone loves a good rally, but the market’s run to all-time highs is making it harder and harder to find bargains with big dividends.

After all, as a stock rises, its price-to-earnings multiple (P/E) goes along for the ride. The S&P 500 is currently trading at a trailing P/E of 18.6. That’s pricey by historical standards, as well as compared to this time last year when the P/E was 16.4.

At the same time, yields on dividends and stock prices move in opposite directions (as they do with bonds). So, as the S&P 500 rises, its dividend yield falls.

Furthermore, the market’s remarkable rally makes it tough to find stocks that can keep screaming higher. After all, stocks have more than doubled in five years. With valuations stretched — especially relative to growth prospects — it’s hard to see equities doubling again in the next five years.

That’s why it’s called a stock-picker’s market. And there are no better stock picks than those that offer a trifecta of outsized growth prospects, hefty dividends and bargain-basement prices.

We scoured the market for these plays, starting with smaller stocks because their modest market caps make it easier to double or even triple off a small base. We also limited ourselves to stocks with annualized profit growth of at least 20% a year for the next five years. Finally, the yield on the dividend had to be at least 5%.

Here are three of the best stocks we found:

Frontier Communications

Frontier Communications (NYSE:FTR)A regional telecommunications company, Frontier Communications (FTR) has seen its shares lose more than 50% since 2010 — and gain less than 5% for the year-to-date. Heavy competition and the erosion of its key small business customer in a sluggish recovery are among the biggest culprits for the drop.

But Frontier is in the midst of a turnaround, luring new customers with low-risk “no contract” offerings. It’s also shoring up its balance sheet by shedding debt.

In the meantime, this is one of the most heavily shorted stocks in the Nasdaq, so you never know when some better-than-expected news could set off a short squeeze. Additionally, Frontier’s relatively small market cap ($4.5 billion) makes it a takeover target in the consolidation-happy telecom industry.

But even if those share-popping scenarios don’t play out, Frontier promises upside through its long-term growth forecast of 22%. And the hefty 8.9% yield on the dividend sure makes it easy to wait for whatever comes next.

CTC Media

ctcmediaThis small-cap media company operates three popular television networks in Russia, but that’s not all CTC Media (CTCM) has going for it. Billionaire owner Yury Kovalchuk is a longtime pal of President Vladimir Putin. That’s important in a country as, er, mercurial as Russia.

CTC also boasts a number of solid fundamentals. It has one of the strongest balance sheets in its industry subcategory, according to data from Thomson Reuters Stock Reports. It’s also solidly profitable, with net margins of more than 15% and a return on equity of 12%.

Shares are up a whopping 61% for the year-to-date and yet still trade at bargain prices. CTC’s forward price-to-earnings multiple offers a 17% discount to its own five-year average. The stock also trades at deep discounts by trailing earnings and price-earnings-to-growth (PEG).

Perhaps best of all, this small-cap stock is expanding earnings at a torrid pace. The annualized growth forecast stands at 34% a year for the next five years. The dividend is mighty generous too, with a yield of 5.1%.

Hi-Crush Partners

hclp185It sounds like a soft-drink company, but Hi-Crush Partners (HCLP) is racking up profits through the revolution in oil extraction.

This tiny company with a market cap of just $917 million makes the sand used in fracking — and as anyone in an oil-boom state like North Dakota can tell you, business is good.

Shares in Hi-Crush have more than doubled in 2013, and yet they still look to have value in them. Yes, the stock trades at a premium to its own five-year average on a forward basis, but get this: The forward P/E is still less than 12. (The S&P 500, lest we forget trades at nearly 19 times forward earnings.)

The S&P 500, however, has a long-term growth rate of just 9.5%, while Hi-Crush is forecast to grow at a clip of 33%. That makes it a steal. And as a master limited partnership, it has to pay out most of its earnings as dividends. The yield currently stands at a juicy 6.2%.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2013/10/growth-stocks-high-dividends-ftr-ctcm-hclp/.

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