6 Dividend Stocks with High One-Year Total Returns
By: Ned Piplovic,
The selection process for choosing stocks that are best suited for an investor’s portfolio involves extensive research and evaluation of multiple variables but the first decision is usually a choice between investing in dividend stocks or capital-growth stocks.
Depending on their overall investing goals, many investors will build their portfolio with a combination of dividend stocks to generate the desired level of income cash flow and capital-growth stocks to build long-term asset appreciation. The ratio of the two types of stocks will depend on the investor’s age, the proximity to retirement, whether the income portfolio is the sole source of income or just a supplemental wealth-building vehicle for part-time investors who have other sources of income, among other factors.
Is there a better way? Are there stocks that provide dividend income and capital growth? Market exchanges offer many dividend-paying stocks from which to choose. Some financial experts insist that dividend-paying stocks – especially stocks with rising dividend payouts – outperform other equities historically. Alternatively, other experts cannot even agree on whether dividend distributions even have merits or any positive effect on the stock’s performance.
However, regardless of the outcome of these debates, there will always be some investors who will seek dividend stocks with high share-price growth. To find stocks that fit the criteria, I have used the Dividend Screener tool on www.dividendinvestor.com to narrow the list to six likely candidates.
First, I excluded mutual funds, which used to be the go-to investment vehicle choice for easy diversification. However, mutual funds have some significant disadvantages and the popularization of exchange-traded funds (ETFs), which offer most of the same benefits as mutual funds without many of the disadvantages, made mutual funds less desirable than they were in the past.
Stocks with good dividend income distributions should yield at least 3%. However, the dividend yield by itself can be misleading and does not indicate the company’s ability to maintain dividend distribution over the long term. Therefore, to mitigate some of the risk of sudden dividend reduction or outright cuts, I limited the selection to equities with a dividend payout ratio of less than 50%.
Another helpful indicator of dividend, as well as share price stability, is the size of the company. Therefore, I included only companies that have market capitalization of more than $10 billion. Lastly, to identify the high capital growth securities, I limited the list to entries that achieved a total return of at least 25% over the past 12 months. This set of filter criteria resulted in the list below.
Below is the list of the six dividend stocks with a balanced benefit of dividends yielding more than 3% and one-year total returns that exceed 25% ordered by the total return from lowest to highest.
6 Dividend Stocks with High One-Year Total Returns: #6
Pfizer, Inc. (NYSE:PFE)
Pfizer rewarded its shareholders with a 28.5% total return over the past year, roughly similar to its total return over the past three years and a five-year total return in excess of 60%. The company’s dividend yield is 3.28% and the dividend payout ratio is a 37%. Pfizer hiked its annual dividend over the past seven consecutive years and 18 times in the past two decades. The company’s next ex-dividend date will be in the first week of November 2018.
6 Dividend Stocks with High One-Year Total Returns: #5
LyondellBasell Industries NV (NYSE:LYB)
LyondellBasel’s total return over the past year was 31.7% and its 3.36% dividend yield is the second highest in this group. The total return over the past three years was a much more positive 42% and the total return was nearly 88% over the five-year period. While the company started distributing dividends only in 2011, it boosted its annual dividend payout over the past five years at an average growth rate of 13.7% per year. The company’s current 26% dividend payout ratio and the 34% average ratio over the past years are lowest of the group and indicate a high probability that the company will be able to support its rising dividend over the long term. The company’s next ex-dividend date will occur in early September 2018.
6 Dividend Stocks with High One-Year Total Returns: #4
The Gap, Inc. (NYSE:GPS)
The Gap performed better than the previous entry with a one-year total return of nearly 50%. The positive total return at this level is a good indication of the Gap’s turnaround in light of the company’s total losses of 3.5% and 22.2% over the last three and five years, respectively. GPS’s current yield is 3.14%, with a dividend payout ratio of 43%. While the company failed to boost its annual dividend in 2017, the total annual dividend payout is on track to end 2018 5.4% higher than the previous year. Prior to paying a flat dividend in 2017, the company boosted its annualized dividend for 13 consecutive years. The company’s next ex-dividend date will occur in early October 2018.
6 Dividend Stocks with High One-Year Total Returns: #3
The Target Corporation (NYSE:TGT)
Target’s 50% total return over the last year is a jump of nearly 40% above of the first two entries. The company offers the lowest dividend yield of the group at 3.11% but has the longest streak of dividend hikes with 46 consecutive years. Since Target is an S&P 500 component with such a long record of dividend hikes, the company has a distinction of being one of just 53 companies that carry the Dividend Aristocrats designation. Target will pay a quarterly dividend – which will be 3.2% higher than the previous period’s payout – to all shareholders of record before the August 14, 2018, ex-dividend date.
6 Dividend Stocks with High One-Year Total Returns: #2
Macys, Inc. (NYSE:M)
After losing more than 70% of its share price between mid-2015 and mid-2017, the company turned around its operations and rewarded its patient shareholders with a total return of 81% over the past year. The company’s current 3.8% yield is the highest in this group and the 29% dividend payout ratio is nearly a third lower than the company’s five-year average payout ratio of 43%. Despite rising its dividend distributions over the past seven years, Macys offered its shareholders a 3.1% total loss over the past five years and a 34% total loss over the past three years. The company’s next ex-dividend date will occur in mid-September 2018.
6 Dividend Stocks with High One-Year Total Returns: #1
Kohl’s Corporation (NYSE:KSS)
With a 101% total return over the past 12 months, the Kohl’s corporation edged out its nearest competition for the top spot by 20%. Additionally, the company currently offers a 3.28% forward yield and a 45% dividend payout ratio. The company started paying dividends in 2011 and has boosted its total annual dividend amount every year since then. In addition to the highest one-year total return, the company offered total returns of 34.5% and 64.5% over the past three and five years, respectively. The company’s next ex-dividend date will occur in early September 2018.
The six equities here represent the selection of stocks that currently offers the best combination of above average dividend income and short-term asset appreciation.
Please not that the table below updates every day and might contain different equities and/or information than listed above as the share prices change.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.