Income investors generally look for high-dividend stocks and low risk. But that’s a difficult combination to find. Dividend yields can rise if the dividend increases; they more often, and more quickly, rise if the stock price falls. And that, in turn, means that many high-yield stocks aren’t performing all that well at the moment — and may have reasonably significant risks going forward.
One way for dividend stock investors to minimize risk is to focus on the balance sheet. Cash-rich companies can be attractive for income investors for two reasons. First, the cash balance protects the dividend itself, by providing a source of funds to keep the dividend intact (or to raise it) in a down year. And second, a clean balance sheet limits the risk to an investor’s capital.
Here are 20 dividend stocks with yields over 3% — and net cash on the balance sheet. All could — and maybe should — be considered for any income investor’s portfolio.
High Dividend Stocks With Net Cash: Foot Locker (FL)
Foot Locker, Inc. (NYSE:FL) is one of the many retailers whose stocks have taken big hits over the past couple of years. Like many of its peers, FL has rebounded – and its outlook appears brighter than most.
After all, the sneaker space still looks reasonably strong. Nike Inc (NYSE:NKE) stock is at an all-time high. adidas AG/S ADR (OTCMKTS:ADDYY) did the same in April before a recent pullback. While direct-to-consumer sales from those giants represent a threat to Foot Locker, it continues to outperform smaller rival Finish Line Inc (NASDAQ:FINL). I wrote in January that Foot Locker looks like the best play in the space – and with FL stock actually down a bit since then, I still think that’s the case.
There are risks here, particularly given FL’s mall exposure. The company’s omnichannel efforts suggest potential margin pressure as well. But sneakers should hold up well to e-commerce competition – customers still like trying on the product, and seeing it firsthand. Almost $6 per share in net cash provides some downside protection, and a 3.1% dividend yield offers income as well.
As we shall see, there are a number of similar cash-rich stocks with solid dividends in the retail space. FL looks like one of the more attractive – for investors willing to invest in the sector.
High Dividend Stocks With Net Cash: A.H. Belo (AHC)
The bull case for A.H. Belo Corporation (NYSE:AHC), the publisher of the Dallas Morning News, took a big hit this month. Disappointing Q1 results sent AHC shares tumbling, and wiped out a nice run: AHC had gained about 40% from late October through mid-April.
But back below $5, there’s still an intriguing case for the stock. The company closed Q1 with $54 million in cash – just over half of its market cap. The original headquarters of the Dallas Morning News in downtown Dallas is up for sale – and could fetch another $25-$30 million. And AHC has built out a digital marketing business as well.
Despite a potentially concerning decline in first-quarter results, AHC maintained its dividend this week, which yields nearly 7%. Should the downtown building sell, history suggests A.H. Belo will pay a special dividend as well.
As such, AHC is probably a better play for a tax-efficient account, given that dividend payments could be a big part of overall returns here. Even with disappointing results, there’s still an argument that AHC could have as much as 80% of its market cap in cash once the headquarters is sold.
It leaves a nice “heads I win, tails I don’t lose much” case for AHC — with solid income while investors wait for the story to play out.
High Dividend Stocks With Net Cash: Chico’s FAS (CHS)
Women’s apparel retailer Chico’s FAS, Inc. (NYSE:CHS) is trading near its highest levels in about eleven months – but there’s still more potential upside here. The company is coming off a strong fourth quarter report that sent CHS stock up about 16%. Full-year fiscal 2017 (ending January 2018) results were solid, with earnings rising year-over-year even excluding a one-time benefit from tax reform.
And FY18 looks solid as well. Chico’s is guiding for a modest decline in same-store sales – but that will be more than offset by gross margin improvement. There’s room for a turnaround in the company’s White House Black Market unit. Chico’s now sells on Amazon.com, Inc. (NASDAQ:AMZN) as well, offering another driver for the company’s ‘omnichannel’ growth strategy. And a 3.2% dividend, along with $1.25 per share in net cash, gives investors, and the company, a reason to be patient as business improves.
With CHS trading at under 11x FY18 consensus EPS, even stable performance is good enough to keep the dividend growing (Chico’s has raised the payout every year since initiating the dividend in 2010) and to grind out some capital appreciation as well.
In particular, investors who believe the recent rebound in retail stocks isn’t over should take a long look at CHS.
High Dividend Stocks With Net Cash: Cohen & Steers (CNS)
Some investors may know asset manager Cohen & Steers, Inc. (NYSE:CNS) for its exchange-traded and closed-end funds. But CNS itself is a worthy investment as well, particularly for income investors.
Cohen & Steers offers a strong balance sheet, as it closed Q1 with over $3 per share in cash – and no debt. Earnings continue to grind higher, with Q1 adjusted EPS climbing 32% year-over-year (thanks in part due to tax reform). CNS’s regular dividend is growing and yields 3.33%, but the company also adds a year-end payout each year, with a 3%-plus special dividend paid at the end of 2017.
There are risks here. Most notably, there’s pressure on the fee aspect of the business. Investors fear a “race to the bottom” in pricing, as index funds gain popularity. But Cohen & Steers funds generally outperform the market — 86% of assets under management in U.S. open-end funds are in 4- or 5-star funds — and growth internationally could offset any U.S.-based pressure.
Obviously, investors need to trust the market as well — including U.S. real estate, where C&S has substantial exposure. But it’s not as if CNS is all that expensive, trading at 14x forward earnings backing out cash.
And if investors are willing to put their money to work elsewhere in the market, they should consider CNS as both a fund sponsor and an investment.
High Dividend Stocks with Net Cash: Spok Holdings (SPOK)
Spok Holdings Inc (NASDAQ:SPOK) is trying to execute the always-difficult ‘pivot’. The company was formerly known as USA Mobility, and was one of the largest suppliers of pagers, with a particular emphasis on hospitals. Obviously, the pager business has been under pressure, and so Spok is trying to build out a suite of software for its users instead.
The investments behind that new business have had a significant impact on profits: EBITDA dropped 36% in 2017, for instance. Margin pressure should continue in 2018. But the software business is starting to see some improvement – 2018 guidance projects 6-17% revenue growth – and the pager business still throws off a ton of cash. (One might think hospitals would have long since abandoned the technology. But near-100% reliability and doctors’ level of comfort have kept declines relatively manageable, and Spok has been able to cut expenses at the same time.)
This has been a company that has managed its cash flow well, and CEO Vince Kelly has said the company will pull back on its investments if they don’t pay off. If the software business fails, existing cash and future profits from the pager business provide some cushion. If the company wins in software, however, there’s real upside here, particularly with the stock not from a multi-year low.
With cash on the balance sheet equal to about one-third of its market capitalization, Spok has time to let its strategy play out. And with a dividend yield of 3.4%, shareholders get paid to wait.
High Dividend Stocks with Net Cash: Nutrisystem (NTRI)
Shares of NutriSystem Inc. (NASDAQ:NTRI) plunged after Q1 earnings in February. The company pulled down full-year guidance after admitting that it had erred with its advertising strategy for the key diet season at the beginning of the year.
I was long shares of NTRI heading into the report — and as I wrote at the time, I averaged down on my position after the post-earnings plunge. This is a company that has been growing nicely for several years — and still has a nice growth runway ahead.
A solid Q1 did send NTRI higher, but I believe there’s still more upside from a current price near $33. The company still has about $2.50 per share in cash – and no debt. It yields 3%. And the midpoint of 2018 guidance suggests a P/E around 16x, and under 15x backing out the company’s cash.
That’s a multiple that suggests Nutrisystem’s growth has come to an end – but I don’t believe that will be the case. The core Nutrisystem business isn’t performing as poorly as management feared, and will have plenty of room for a rebound in 2019. South Beach Diet, acquired for a pittance, is growing like gangbusters and should become a material contributor to profit next year as well.
This a stock that received a P/E well north of 20x just a few months ago because investors believed it had years of growth ahead of it. One poor diet season — with fixable mistakes already addressed by management — shouldn’t change that outlook.
If Nutrisystem is back on track, and get back near that multiple, there’s a case for NTRI to double over the next couple of years.
High Dividend Stocks with Net Cash: Watsco (WSO)
And such a minor difference isn’t enough to push a quality stock to the sidelines. Watsco is the largest distributor of HVAC (heating, ventilation, and air conditioning equipment) in the country. It’s a fragmented industry that allows for a ‘roll-up’ strategy (Watsco has acquired 59 businesses in the last three decades) and gives Watsco a competitive edge.
WSO stock isn’t cheap – but when it comes to a quality industrial stock, none really are these days. A 3.2% yield takes the edge off valuation a bit, and even in what the market seemed to think was a disappointing first quarter, Watsco still grew EPS 25%.
Even with its P/E multiple above 23x, WSO simply is a long-term buy and hold candidate as a business. Adding in a clean balance sheet and a 3%-plus yield only makes the case stronger.
High Dividend Stocks with Net Cash: Evolution Petroleum (EPM)
Like many oil & gas peers, Evolution Petroleum Corp (NYSEAMERICAN:EPM) has rallied of late on the back of higher crude prices. Unlike many of those peers, Evolution has a clean balance sheet – and room for growth.
The company in fact acquired assets primarily in the Permian Basin just this week – using up its cash balance in the process. But net cash still is likely modestly positive, and so far Evolution has made sure to build out its assets using cash flow instead of higher-risk debt.
That strategy has been enough to support a 4%-plus dividend yield – and allow EPM to benefit nicely on the big gains in crude. A joint venture with struggling Denbury Resources Inc. (NYSE:DNR) remains a sticking point, but $70-plus oil could allow both companies to finally improve those operations.
DNR stock has quadrupled since late October and Evolution may see some spillover benefits from its partner’s newfound health.
High Dividend Stocks with Net Cash: American Software (AMSWA)
American Software, Inc. (NASDAQ:AMSWA) offers an interesting combination of income, growth, and balance sheet protection. AMSWA yields over 3.3%, and closed its fiscal Q3 (ending January) with about 20% of its current market cap in cash.
Meanwhile, the business is growing. American Software offers both SCM (supply chain management) and ERP (enterprise resource planning) products. Both categories are growing nicely – and AMSWA is benefiting.
Revenue has grown 4% so far this year, but that’s with a headwind from more customers moving to subscription billing, which pushes the recognition of some revenue into future periods. More impressively, Adjusted Ebitda has grown 50% year-over-year, and adjusted net income has doubled.
Valuation is a bit of a concern, at about 12x EV/Ebitda and 25x-plus EPS, even backing out the net cash on the balance sheet. But there is an argument that American Software is worth paying up for — for both income investors and growth investors.
High Dividend Stocks with Net Cash: Garmin (GRMN)
The beauty of Garmin Ltd. (NASDAQ:GRMN) truly is in the eye of the beholder. The company has done a hugely impressive job adapting to a steady multi-year decline in sales of its GPS units.
Revenue in that business has dropped by over half in just the last seven years. But a pivot to the marine and outdoor categories, along with ‘smartwatch’ sales, have allowed Garmin to grow regardless. First- quarter revenue actually set a record despite continuing weakness in the automotive business.
Meanwhile, Garmin has a whopping $12 per share in cash, and no debt. It yields 3.55%. And backing out that cash, 2018 EPS guidance suggests a reasonable ~16x multiple.
But I’m still not quite sold on GRMN, as I wrote back in February. The hardware business is notoriously tough, as shareholders of Fitbit Inc (NYSE:FIT) and GoPro Inc (NASDAQ:GPRO) have learned. Top-line growth isn’t that impressive, and a reasonable multiple looks about right going forward considering the company’s growth prospects.
I’ll admit, however, that other investors might see it differently — and at the least investors buying GRMN stock should know they’re in good hands as far as management goes. James Brumley made the case for GRMN this month, and he makes some good points.
Even bears have to admit that the company has performed exceedingly well in a very difficult industry. On which part of that history — the performance or the industry — an investor chooses to focus likely will drive his or her sentiment toward Garmin stock going forward.
High Dividend Stocks with Net Cash: Moelis & Company (MC)
In the wake of the financial crisis, with so many investment banks tarnished (or in some cases gone), there was an opportunity for an independent company to step up. That’s exactly what Moelis & Co (NYSE:MC) has done — and so far it’s been a raging success.
A company founded in 2007 now is worth over $3 billion. MC stock has risen 132% from its 2014 IPO price of $25. Moelis even was named an adviser to the Saudi Aramco IPO, potentially the largest ever.
Fundamentally, Moelis just keeps chugging along. Adjusted EPS rose 56% in Q1 on the back of a 27% jump in revenue. The company continues to add new directors and partners, while expanding its geographic reach. Without the other divisions — and potential conflicts of interest — seen at larger rivals like Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS), Moelis continues to win more than its fair share of deals.
Meanwhile, a recently raised dividend yields 3.2%, and the company holds no debt. A 19x forward P/E multiple might be considered a bit pricey — particularly because Moelis has a good deal of cyclical risk. Any slowdown in M&A, in particular, could send its revenue and earnings falling.
Still, from a qualitative standpoint, Moelis seems to be in the right place at the right time. And it seems to have a path to grow into a behemoth in corporate finance while rewarding shareholders along the way.
High Dividend Stocks with Net Cash: Baldwin & Lyons (BWINA)
Baldwin & Lyons Inc (NASDAQ:BWINA,NASDAQ:BWINB) is an under-the-radar insurer focused mostly on the commercial transportation space. FedEx Corporation (NYSE:FDX) is the company’s key customer, part of B&L’s focus on the trucking industry.
BWINB has been a consistent dividend payer over time, even if dividend growth has been relatively muted. But a 4.8% yield is attractive in any market. BWINB also trades at a nice discount to book value: price-book is 0.85x at the moment, near its lowest levels this decade.
Long-term, there is potential disruption from self-driving trucks — though such a risk appears at least a decade off (and those vehicles will not be foolproof). The reliance on FDX raises a risk as well.
But B&L has been an industry specialist since 1930 — and has been through all sorts of changes in its industry. With a cheap price, a rock-solid balance sheet, and a strong dividend, investors can own that expertise at an attractive valuation.
High Dividend Stocks with Net Cash: Buckle (BKE)
Even in a sector filled with concerns, and despite having over $4 per share on the balance sheet, Buckle Inc (NYSE:BKE) looks like one of the riskiest plays in retail.
The company is heavily exposed to the tough mall space, with 84% of its locations in shopping malls, per figures from the 10-K. Revenue and earnings are headed in the wrong direction. And as a result, shorts have targeted the stock. A whopping one-third of the float (though closer to 21% of shares outstanding) is sold short at the moment.
With BKE now having more than doubled from its 52-week low, the stock looks dangerous from here, particularly ahead of Q1 earnings this month. But for investors who see the retail sector as oversold, those characteristics all make BKE an intriguing play at this point. A strong Q1 report could squeeze those shorts. Easy comparisons could help growth this year.
And even after the gains over the past year, BKE remains cheap. Backing out its cash, it trades at about 11x EPS. I’d personally rather own FL or other retailers on this list. However, investors more bullish on retail may see it very differently.
And if those investors are right, the short float and recent underperformance suggest BKE may have the most upside of any retail stock on this list.
High Dividend Stocks with Net Cash: Ethan Allen Interiors (ETH)
Ethan Allen Interiors Inc. (NYSE:ETH) is a turnaround play, pure and simple. Revenue has dropped over 1% through the first three quarters of the company’s fiscal 2018. An effort to redesign a substantial amount of the company’s product line and update its brand image has had some hiccups, in terms of both production and demand. Margins have weakened, and adjusted EPS has dropped about 10% so far this year.
But investors can get “paid to wait” and Ethan Allen has cleaned up its balance sheet in the meantime. Debt has dropped to under $2 million, against $52 million in cash. The dividend has been raised steadily over the past few years, and ETH now yields a solid 3.1%.
And there is room for a turnaround here. Ethan Allen remains a well-known, high-end brand. It’s possible that the resurgence at Restoration Hardware Holdings, Inc (NYSE:RH) is hurting Ethan Allen. Online retailer Wayfair Inc (NYSE:W) looks like a formidable rival as well. But if Ethan Allen’s new products start gaining some acceptance — backed by the higher marketing spend that is hitting margins at the moment — Ethan Allen could go back to being a fearsome competitor itself.
Ethan Allen is having some growing pains at the moment, but if the strategy is viable long-term, there’s reason to see some better days ahead. With the stock bouncing recently off a five-year low, more risk-tolerant investors might be willing to give ETH another shot.
High Dividend Stocks with Net Cash: DSW Inc. (DSW)
A strong balance sheet, 14x earnings multiple, and 4% dividend yield all look nice. But FL looks like a better play in footwear — and it’s cheaper too.
That said, this isn’t a bad stock and DSW is grinding out some growth. As Luke Lango has pointed out, catalysts should be on the way in 2018.
It’s possible that DSW’s discount model will perform more like a Ross Stores, Inc. (NASDAQ:ROST) or a TJX Companies Inc (NYSE:TJX) than a mall play like Foot Locker or Finish Line. If that indeed is the case, my current caution will look foolish down the line.
High Dividend Stocks with Net Cash: Paychex (PAYX)
Fundamentals aside, Paychex, Inc. (NASDAQ:PAYX) simply seems like a good stock. The second-largest payroll processing company in the U.S. has a solid moat – and its business model creates high switching costs. Paychex is simply embedded in its customers’ businesses — and given the growth in small and medium businesses of late, that seems like a good thing long-term.
There is a risk of disruption here. Software provider Workday Inc (NASDAQ:WDAY) represents a potential threat, though Paychex is developing its own products to fight back. A macro downturn could hit the stock, though the company managed through the 2008-09 financial crisis reasonably well.
PAYX isn’t necessarily cheap, either, at 23x forward earnings. But this is a case of paying for quality, as Will Healy argued last month. And a 3.1% dividend yield makes the stock attractive to income investors as well.
PAYX probably isn’t going to bring in huge rewards, but for patient long-term investors, it looks like an intriguing choice.
High Dividend Stocks with Net Cash: Qiwi (QIWI)
Qiwi PLC (NASDAQ:QIWI) is a high-risk, high-reward play – for obvious reasons. 74% of the payment company’s revenue comes from Russia. That obviously makes it extremely reliant on that country’s economy – and vulnerable to political shocks both in the country and without (such as U.S.- imposed sanctions).
But there’s an intriguing case to make QIWI a part of a high-risk or emerging markets portion of an investor’s portfolio. The company has about $5 per share in cash against a share price around $18. The dividend is choppy, but the past four quarterly payments provide a 4%-plus yield. There’s even a potential play on blockchain here.
And QIWI is pricing in an awful lot of its risks, trading at just 11x forward EPS estimates. Obviously, that alone doesn’t make QIWI stock cheap. But it makes it cheap enough to be interesting, at least.
High Dividend Stocks with Net Cash: Dorchester Minerals (DMLP)
Dorchester Minerals LP (NASDAQ:DMLP) is an intriguing play but also among the highest-risk investments on this list. Dorchester owns royalties and NPIs (net profits interests) in several hundred properties across 25 U.S. states. From a fundamental screen, DMLP looks attractive, with a 7.4% dividend yield and a little bit of net cash (along with no debt).
But because DMLP’s distributions are coming from royalties, those distributions can be exceedingly volatile. As the shale bubble burst, for instance, DMLP’s quarterly distribution dropped from $0.48578 to $0.16743 in just six months. Given that the royalties are based both on price and on the drilling on its land, there’s a huge reliance on crude oil prices – and a large risk if those prices drop, as seen in 2015-2016.
That said, for those investors bullish on oil and gas, DMLP is an intriguing play. Unlike a lot of royalty trusts, DMLP doesn’t have a set date for liquidation. In fact, it can use its shares to actually acquire more royalties and NPIs, creating some level of growth (albeit with dilution).
Again, this is a risky play – and one that needs higher crude prices to move higher. Investors uncomfortable with that risk should look to plays like Exxon Mobil Corporation (NYSE:XOM) or Chevron Corporation (NYSE:CVX), whose downstream operations provide an internal hedge.
For investors bullish on crude and natural gas, however, DMLP is an interesting direct play – and, for now anyway, a nice source of income.
High Dividend Stocks with Net Cash: Guess? (GES)
Guess?, Inc. (NYSE:GES) was one of the biggest surprises of the first quarter. A blowout first-quarter report sent GES shares up 28%, and the run didn’t end there. GES shares now have gained over 50% so far this year and have nearly tripled from an 11-year low reached last year.
Even after the gains, there’s still a case for more upside, however. GES has managed to minimize its exposure to the more difficult and more competitive U.S. market. Instead, it’s focused its investments on Europe and Asia — and is having significant success in both regions. Asia, in particular, represents a real long-term opportunity — but drove just 7% of operating earnings in fiscal 2018 (ending January).
The balance sheet remains pristine, with almost zero debt and nearly $4 per share in net cash — about 15% of the company’s market capitalization. Backing out that cash, GES is trading at 24x FY19 consensus EPS estimates.
That’s a big multiple in the world of retail these days — and might scare off some investors. But margins remain thin, and Guess? is in the early stages of a turnaround. With GES still yielding 3.5%, income investors looking for growth could see the stock as a worthy choice.
High Dividend Stocks with Net Cash: Dover Motorsports (DVD)
To be honest, I’m not the biggest fan of micro-cap Dover Motorsports, Inc. (NYSE:DVD). NASCAR attendance continues to drop, as do television ratings. Dover’s management has made some questionable decisions, including a multi-year attempt to sell its former speedway outside of Nashville, Tennessee, and the refusal to sell at $5 last decade (a price more than double the current $2.10).
But for investors focused on income and downside protection, there is a case to be made for DVD. NASCAR’s broadcast deal runs through 2024, providing guaranteed (and growing) high-margin revenue for each of the track’s two races. The company has made some money in Nashville, which will allow it to remove its debt, and it remains free cash flow positive. The dividend, paid annually, yields 3.9% after being raised last year.
There is some value here, though the question is whether largely absentee controlling shareholders will create that value. There’s also the possibility that the recent legalization of sports betting could benefit Dover – particularly given that Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE), which split from DVD in 2002, sits right next door.
Again, I do question whether there’s much in the way of upside potential here — or if DVD simply will be “dead money.” But a near-4% yield does help the case, and investors who believe NASCAR can turn around — perhaps with some help from gambling — may see value here.
There are worse stocks in the market than DVD, to be sure, even if I believe there are better ones, too.
As of this writing, Vince Martin is long shares of Nutrisystem Inc., and has no positions in any other securities mentioned.