A Bank With A Great Dividend

A few weeks ago we covered a bank stock with a nice yield for savvy dividend investors. That stock was M&T Bank. Today, we have located another bank stocks with an absolutely fantastic yield .This bank has been a solid stock performer for years and has gone largely unnoticed by Wall Street. The company is United Bankshares (UBSI).

United Bankshares has been around forever serving its customers since 1839. The company has its corporate headquarters in both Washington D.C. and Charleston, West Virginia. United Bankshares has 112 offices on the eastern seaboard and holds $7.5 billion dollars in assets. It is one of the largest bank holding companies in the world.

As everyone knows, the banking industry is a competitive marketplace. Banks compete for consumer and institutional investor dollars. United Bank competes against regional banks such as BB&T, Huntington Bancshares, and Suntrust Inc. Despite stiff competition, United has held up rather well. United Bank’s revenue growth is 40% higher than the industry average and operating margins are 100% higher than competitors. Profit margin is excellent at 25%

The bank has been one of the top performing banks during the crisis. The company’s revenue and net income have remained high over the past few years making the stock a consistent member of the U.S. Select Dividend Index. The company has over $700 million dollars in cash and $1 billion dollars in debt.

United Bankshares asset quality has been consistently rated highly. The company’s Tier 1 ratio is outstanding at 12% and its risk based capital ratio is 13.4%. This is well above the 10% ratio that most banks have to be at in order to be considered well capitalized. Return on equity was high at 9% and return on asset was slightly below 1%.

The company’s stock trades at 16 times this year’s earnings. The P/E ratio is equal to the industry average of most banking institutions. Earnings are expected to grow at an 8% annual rate over the next few years. Shares currently trade at just 1.5 times book value. The stock trades at 2 times earnings growth and 4 times the company’s sales.

United Bankshares dividend is rock solid. The company just increased it dividend for the 37th consecutive year. That’s quite an impressive streak. Over the past 37 years, the dividend has increased from just 6 cents a share to its present value at $1.20. United’s shareholders have to love the 9% annual dividend growth rate.

The current dividend yield is 4.60% which is higher than the historical yield of 3.90%. The current payout ratio is 75%.United Bankshares is an appropriate stock for investors looking for a solid dividend stock whose dividend will continue to increase over the next few years.

Hershey Company Dividend – HSY

Founded in 1893, the Hershey Company has been serving up chocolate and other confectionary treats for well over 100 years. They have one of the most recognizable brands in the entire world. From their headquarters in Hershey, Pennsylvania, the company controls an operation that includes 12,100 permanent employees. You can find a Hershey bar in just about every country in the world.

Manufacturing, marketing and distribution of their products all around the world, are the basic operations of Hershey Company. While a weak economy and a growing trend of eating healthier and eating less sweets has caused some weakness in sales, the company still manage to post a gain when they reported third quarter numbers in October of 2010. They beat the .73 cents earned back in the same period one year ago by .06 cents when they reported earnings of .79 for Q3 2010 (an 8.2% increase).

Hershey’s stock price (ticker symbol HSY on the NYSE) enjoyed a 26.2% rise from November 5, 2009 to November 5 2010. The price rose from 35.79 to 48.49 during the most up-to-date annual comparison. Major competitors fared almost as good. Nestl (NSRGY.pk) saw price appreciation of 23.4% as the one year period began with a November 5, 2009 stock price of 47.20 and closed this past Friday (Nov. 5, 2010) at 58.25. Another competitor, Kraft (KFT) showed some gain in stock price. They were up 14.9% year over year. Their performance may have been hampered by talks of acquisition and takeover during part of the year.

Dividend Information
As of 11/13 Hershey was paying an annual dividend of 1.28 giving it a yield of 2.7%. EPS is at 2.18 and the PE ratio is 21.83. It was great to see HSY raise their dividend again in 2010.

Dividend History
2010: 1.28
2009: 1.19
2008: 1.19

A Defensive Stock With A Generous Yield

Today, I would like to take a look at a company that is truly a defensive play. The company in question is the largest defense contractor in the United States and one of the largest defense contractors in the world. The company is actively involved in the defense, aerospace, and security industries. The defense contractor uses its advanced technology to create aircrafts, missile systems, combat systems, and satellite systems. This defense contractor earned over $45 billion dollars last year in sales.

The company is Lockheed Martin (LMT) As you may very well know, the defense sector is a very competitive industry. Contractors consistently try to underbid each other in order to gain access to lucrative government contracts. Lockheed Martin derives the bulk of its revenue from military sales to the government. 70% of the company’s revenue comes from defense spending alone. The main competitors in the industry are Northrop Grumman, Boeing, and Raytheon.

The biggest concern for the industry is government cutbacks. The federal government is expected to cut back on federal IT spending and combat machine spending such as strike fighters. The government has been shifting from higher margin aircrafts to lower margin aircrafts. Lower defense spending would directly impact the company’s revenue stream. The company should be okay however since it still has a sizeable backlog with over $70 billion dollars in orders.

Lockheed Martin is a cash cow generating nearly $2.8 billion dollars in free cash flow last year. The company has over $3.4 billion dollars in cash on the balance sheet. This is good to see considering that the company has sizable pension obligations for its employees. Profit margins are slim at 9% but are better than industry competitors. Revenue growth was also higher than competitors at 5.6% and Lockheed’s gross profit over the past year was $4.2 billion dollars.

Shares of Lockheed Martin appear undervalued at under $70 per share. The stock is trading right in line with its historical and future growth rates. The company has been able to grow earnings at an 8.5% rate over the past five years and is projecting 8% growth over the next 5 years. This is cheap considering that many competitors shares are trading well above their growth rates.

Lockheed Martin is worth owning for the dividend yield alone. The stock has a 4.3% yield which is nearly twice its historical 2.2% yield. The company has been returning cash back to shareholders by bumping up its dividend yield over the past few years. Investors have no reason to worry about the safety of the high payout since the company only pays out 34% of earnings via dividends.

Value investors looking for a long term stock with a dividend that is likely to increase over the next few years should turn their attention to Lockheed Martin.

Emerson Electric Company Dividend – EMR

Emerson Electric Company is a global supplier of industrial equipment and related services, providing design and engineering solutions, product technology, and project management to consumer, industrial and commercial markets worldwide. Emerson’s operating divisions are Process Management, Industrial Automation, Network Power, Climate Technology, and Appliances and Tools. Process Management is the largest division, accounting for 29% of the company’s activity. Network Power is the next largest with 25%.

Emerson operates in over 150 countries. It maintains 250 manufacturing facilities, 165 of them outside the U.S., and a third of the company’s sales are in emerging markets. In 2009, the company registered over 700 patents.

Emerson is the fourth largest company in its industry segment. Its chief competitors are General Electric, ABB Ltd and Hitachi Ltd. While it is outranked in total size by all of these companies, it has recently shown much more aggressive growth, and more profitability, than any of the others. Over the past year Emerson’s stock has outperformed that of G.E. and ABB and equaled the market performance of Hitachi. Emerson has shown remarkable stability over its operating history, with a record of 53 consecutive years of increased dividends.

Emerson Electric Company was founded in 1890 and is headquartered in St. Louis, Missouri. Emerson trades on the New York Stock Exchange under the symbol EMR.

Dividend Information
Emerson has a long history of increasing it’s dividend. As of 11/13 EMR was paying 1.35 per share giving it a yield of 2.45%. The EPS is 2.86 and the P/E ratio is 19.37.

Dividend History
2010: 1.35
2009: 1.32
2008: 1.23

Dividend Mutual Funds

To understand the advantages that can be gained by purchasing dividend paying mutual funds, it may be helpful to understand exactly what the name means. A mutual fund is a collection of bonds, stocks, and money markets that is professionally managed. Investors join a pool of other investors and purchase units in the fund. The amount of the fund’s profit (or loss) is apportioned based on the amount of each investor’s position. Because investors deal with the fund, shares are easy to buy or sell.

Dividends are payments made by a company or a fund to its shareholders. They indicate that the company has made a profit. Typically, paying dividends is a sign that a company’s financial position is solid. Struggling companies either do not have the cash or need all their cash to keep the doors open. The payment of dividends can make the company’s stock more attractive to new investors and keep current investors pleased with performance.

Mutual funds typically pay dividends quarterly. How the dividends are taxed depends on the type of fund. For example, real estate investment trusts and bond funds do not generate qualified dividends in the eyes of the Internal Revenue Service. Stocks and most utilities, on the other hand, receive better treatment for taxes as long as a minimum of sixty days has elapsed between purchase and the date shareholders qualify for a dividend.

Mutual funds offer a convenient method of tapping into a dividend stream. There is no need for the investor to try to identify individual stocks. Most funds are comprised of dozens or even hundreds of stocks, so the investor is instantly diversified. With many stocks in the fund, the risk is minimized, since no one company can have a major impact on the investment. In addition, since purchasing mutual funds does not generate a commission for the broker, it is possible to make small investments at frequent intervals without generating large fees. All of these factors make mutual funds a safer and more economical method of investing than choosing individual stocks.

When purchasing dividend paying mutual funds, investors should look for an established fund with a successful record of accomplishment. A good income fund will feature high-yield stocks as well as a diversified portfolio that offers the potential for dividend growth. Funds must state the scheme and goals under which they operate, so reading the prospectus carefully and educating oneself on investments in general are advisable.

Investors should realize that higher yield stocks often carry a greater risk. Choosing a well-diversified fund minimizes the risk of loss. Since there are so many funds from which to choose, investors should select one that has a portfolio with which the investor is comfortable. Making a mutual fund that pays dividends part of an investor’s portfolio can be an excellent option. However, investors should remember the mantra of diversification, and make sure that their portfolios include other investment options as well.

China Mobile Limited Dividend – CHL

China Mobile Limited is the leading provider of mobile phone services in China. Their main focus is on voice calls both inside and outside of China. They provide GSM roaming in 237 countries and regions and GPRS roaming in 182 countries and regions. Value added services include caller ID, voice mail, conference calling and more. Data transmission services include SMS, WAP and MMS. The company was incorporated as China Mobile Limited in Hong Kong in 1997 and trades on NYSE (CHL) and SEHK (0941). Only 25.78% of the company is publicly owned.

China Mobile Limited has only two noteworthy competitors. China Unicom Limited and China Telecom Corporation Limited. China Unicom incorporated in 2000 and provides similar mobile services in addition to land line and Internet services. China Telecom was founded in 2002 and provides mobile services, land line and Internet services to China.

China Mobile’s focus on mobile services has made them the dominant player in China with a customer base in excess of 570 million. China Telecom’s mobile customer is base is just over 56 million and China Unicom has almost 150 million mobile subscribers.

China mobile has the largest market capitalization of the three at $205.76 billion vs $74.59 billion for China Unicom and China Telecom combined. As of November 8, 2010, China Mobile stock is at $51.28 vs $48.00 one year ago. China Unicom is at $14.06 vs $13.57 one year ago. China Telecom is at $51.25 vs $45.78 one year ago.

Dividend Information
CHL has some solid numbers. Their annual dividend is 1.64 which gives it a yield of 3.2%. EPS is 4.36 and the PE ratio is just 11.77. They have also resumed raising their dividend in 2010.

Dividend History
2010: 1.63
2009: 1.59
2008: 1.61

Intel Increases Its Dividend

You have probably heard of Intel Corporation before. The company’s name is plastered over countless electronic products. As a matter of fact, the company probably built the microprocessor that powers your personal computer, tablet PC, netbook, smartphone, or electronic device. Intel owns the microprocessor market for personal computing. The company has been around since 1968 and its best days are still ahead of them.

The company’s chief competition in the processing market is Advanced Micro Devices. AMD is still a small player with a market cap of just $5.2 billion dollars and revenue of $6 billion dollars. Intel Corp.is the dominant player in the industry with a market cap of $120 billion dollars and annual revenue of $46 billion dollars. The recent purchase of McAfee will only help to bolster the company’s earnings power.

The earnings for Intel will only increase as the consumer demand for new electronics continues to grow.  Intel has a great management team as well that has been able to deliver consistent results for the company. The company has a 24% return on equity and a 17% return on assets. Operating margins were high at 35% and profit margins were high as well at 25%.

The stock is not the steal that it was at $18 but Intel is still cheap at $21 a share. The stock trades at just 10.5 times earnings and a 0.83 price to earnings growth. This is higher than the 7% growth rate of the past five years but below the 12.8% estimated growth rate of the next five years.

Intel is more than just great earnings. Intel has the kind of balance sheet that other companies dream about. The company has $20.7 billion dollars in cash on hand and generates $ 14.5 billion in free cash flow. Intel has 10 times as much cash as long term debt on the balance sheet. That’s remarkable. The company has nearly $4 a share on its balance sheet in cash alone.

Intel offers capital appreciation and great dividend as well. The average dividend payout has been 2.3%. The stock is currently yielding 3% and raised its dividend 15% to 72 cents per share. That is an effective yield of 3.3%. The company can easily cover its dividend as Intel pays out just 33% of earnings via dividends. There is plenty of room for more dividend increases in the future.

Intel is an attractive stock as the tech giant just reported that it expects its earnings to be the best ever in 2011. Long time investors that are seeking a blue chip stock with a growing dividend may find that Intel has the right stuff for their portfolio.

Boeing Company Dividend – BA

The Boeing Airplane company is the largest aircraft maker in the United States, primarily building several airline transport aircraft models, although it is also involved in military aircraft projects. Boeing has it’s largest assembly plant in the Seattle, Washington area and another in Wichita, Kansas. In 2001 Boeing moved it’s corporate headquarters to Chicago from Seattle.

Their biggest project is the Boeing 787 Dreamliner, an all new airliner built of composite materials, which has never been done before and promises much better fuel economy than comparable aircraft. Another new offering is the latest makeover of the Boeing 747, which has now been in production for over thirty years.

The largest competitor is Airbus, an alliance of European companies, their biggest project is the A380 super jumbo, which has dethroned the 747 as the largest passenger aircraft.

The Boeing stock symbol is the letters BA, which closed at 71.27 on November 5th, 2010 compared to about 50.00 a year earlier and reaching a peak of about 75.00 during April 2010.

As of November 2010 Boeing had received 480 airliner orders this year, while Airbus received 369. The Boeing military aircraft unit was reorganized in September from six units to four, and has 124 F-18 fighter jets on order.

Dividend Info
BA is paying an annual dividend of 1.68 per share giving it a yield of 2.6%. Their P/E ratio is 13.68 and the market cap is 46.28. It’s disappointing to see that Boeing will not be raising its dividend for 2010.

Dividend History
2010: 1.68
2009: 1.68
2008: 1.60

Blackrock Equity Dividend Fund

The Blackrock Equity Dividend Fund I (MDDVX), formerly known as the ML Equity Dividend Fund, seeks current income and long-term total return, primarily by investing in an equity securities portfolio, putting its focus on issuers with good capital appreciation prospects. Normally, it invests a minimal 80% of assets in securities paying dividends. The remaining holdings may include non-convertible preferred stock and convertible securities, with about 16.29% in foreign stocks.

Started on November 25, 1987 (with Investor A class shares first offered on October 21, 1994), the Blackrock Equity Dividend Fund, is a large value fund with a total market cap ranging around $10.3 billion. It has a 5-star Morningstar rating with a low to average Morningstar risk rating within category. It has a Lipper Classification of an Equity Income Fund, and a 2.28% SEC yield and dividends paid quarterly.

Among the top holdings in the Blackrock Equity Dividend Fund are ExxonMobil Corporation, BHP Billiton Limited, AT&T Inc Communication, Churchill Ventures Ltd, J.P. Morgan Chase, Rio Tinto ADR, Total SA ADR, General Electric, Deere & Company, Raytheon Company, Chevron Corporation, Wells Fargo Company, Caterpillar Inc, United Technologies, and El Dupont de Nemours.

In terms of sector weightings, the Blackrock Equity Dividend Fund holds about 14.9% of its assets in industrial cyclicals, followed by about 14.3% in consumer staples, 14.1% in energy, 13.8% in financials, 10% in materials, 7.6% in utilities, 6.0% in telecommunication services, 5.0% in healthcare, 4.8% in consumer discretionary, 4.1% in information technology, and 5.4% in cash and cash equivalents.

The expense ratio of the Blackrock Equity Dividend Fund is 1.08% which is in the average range for its category. Initial maximum sales fees are 5.25% with a minimum initial investment of $1,000, an initial IRA or AIP investment of $50, and minimum subsequent investments of $50.

As of September 2010, the fund has returns of 5.2% over the past 10 years, 2.8% over the past 5 years, -5.7% over the past 3 years, and 10.5% over the past year, with a year-to-date trailing return of 3.5%.
The Blackrock Equity Dividend Fund is managed by Robert M. Shearer and Kathleen Anderson, and is open to new investors.

The above information regards Investor A class shares, although Investor B (MBDVX), Investor C (MCDVX), Class R (MRDVX), Institutional (MADVX), and Service class shares of the Blackrock Equity Dividend Fund are also available.

Safe Dividend Stocks List

Recently we released a new feature for our Top Dividend members:

The safe dividend stock list.

The safe dividend list currently has 70 stocks listed on it, each of which has raised its dividend for 20 years or more. Many of these stocks are also on the dividend aristocrats list. The dividend aristocrats list is published by the S&P website.

We’ve used those stocks to create our safe dividend list. We then and added key financial data like the dividend growth rate, payout ratio, income growth rank and industry rank. We’ve used those key dividend data points to rate each stock, giving additional weight to the fact that each of these stocks has been paying and raising it’s dividend for at least 20 years.

Most of the stocks listed have excellent payout ratios. But even stocks that have high payout ratios on this list could be considered as a solid dividend investment because of their excellent track record of raising their dividend. For those that like the high yields there are currently 5 stocks on this list that yield 5% or more.

Top Dividend members can access the safe dividend list here. If you are not a member but want to get access to this list you can sign up here: Top Dividend Stocks.