Each week, I’ll be serving up a new “yield” of dividend-paying stocks.
The companies I include might end up in the rundown for any number of reasons – whether they have excellent or horrible growth potential, recent or inconsistent dividend increases, paltry or impressive yields… or maybe a stock’s that’s been making rounds in the media and is just begging for more attention.
Whether you want to add the company to your watch list or avoid it like the plague, let this serve as some food for thought.
First on deck…
Inconsistency is the Hobgoblin…
Brady Corp. (NYSE: BRC) is a Milwaukee-based manufacturer of identification and labeling products, including safety-oriented signage, badges for individuals, and barcode adhesives for various materials.
BRC has paid dividends for the last 20 years and management recently announced an increase from the annual $0.74 per share to $0.76.
Based on [yesterday's] closing price of $28.40, that gives it a projected yield of 2.68%. The dividend will be paid October 31 to shareholders of record on October 10.
But despite Brady Corp.’s lengthy history of disbursements and a moderately attractive yield, its record of increases hasn’t quite been up to snuff and the company claims only 15 increases altogether. This lowers the dependability of the dividend significantly, as steady, unwavering increases are a must for a stock to qualify as a worthy dividend investment.
Further, Brady missed sales estimates in the fourth quarter, albeit narrowly – $322.5 million versus the anticipated $327.2 million – and also reported a 21.7% decline in net income. The stock has been lackluster as well, losing 6.7% year-to-date, compared to the S&P 500’s 16.09% gain over the same period.
All this adds up to an “on-the-fence” dividend payer that needs a few more years of reliable increases – not just disbursements – before it becomes a serious investment consideration.
Speaking of Mediocre Dividend Stocks…
EastGroup Properties Inc. (NYSE: EGP) is a REIT that leases industrial spaces throughout Florida, Texas, Arizona and California.
Its Board of Directors recently approved an increase of its quarterly dividend from $0.52 per share to $0.53, or $2.12 annualized. That represents a projected 3.8% yield based on today’s closing price of $54.67. The dividend will be payable September 28 to shareholders on record as of September 28.
Unfortunately, like Brady Corp., EastGroup’s long history of payments (20 years and counting) and moderately attractive yield is not equally matched by the consistency of its increases. This quarter marks the first hike to EastGroup’s dividend since 2008.
Before that, there were three additional years where management failed to provide shareholders with an increase.
So, while EastGroup’s stock is outperforming the market – it’s gained 28.7% year-to-date – the lapse of increases leading into this quarter is a dealbreaker. EGP would need to double down on its commitment to dividends for a number of years before becoming a worthy portfolio addition.
A Growth Stock in the Making?
From its website, Epiq Systems Inc. (Nasdaq: EPIQ) “is a leading global provider of technology-enabled solutions for electronic discovery, bankruptcy and class action administration.”
Epiq is a fairly new dividend-payer, initiating its first payment of $0.04 per share in 2010 and making three increases since, including the 38% increase this quarter from $0.065 per share to $0.09. That represents a projected yield of 2.77% based on today’s closing price of $12.99.
Year-to-date, Epiq shares have underperformed the market, gaining 9.86%. That said, they’ve still managed to do slightly better than the IT Service sector in general, which gained 8.56% in that same period.
But slight short-term share underperformance is no mark against a possible dividend growth stock in the making. So if Epiq Systems displays only two or so more years of dividend increases and payments – especially if management confirms positive guidance on its dividend commitment to shareholders – it will be well worth considering Epiq as a serious dividend growth investment.
Best regards,
Ryan Anders
Source: Dividends and Income Daily
