Below is a list of what I believe are the best values among dividend-paying stocks heading into 2012, ranked from 1 to 100. The rankings were locked in after the market closed on December 17, 2010, and counted down on this site over the last ten weekdays of the year.
It’s important to realize that these aren’t the 100 stocks I think are most likely to bring home explosive returns during 2012, because I don’t invest with that short of a window in mind. They represent the 100 companies I think are the most attractively-priced for long-term returns as we close the book on 2010.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 1. Vale S.A. (VALE)
Even after rising during the final days of 2010, shares of VALE still trade below 8x future earnings. Dividend has tripled since its 2007 valley, and has plenty of room to grow thanks to a forward payout ratio of just 11% and a top line on pace to nearly double this year.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 2. Tower Group, Inc. (TWGP)
Tower’s revenue and dividend rate have both quintupled since 2006, and neither seem to be losing momentum. Trades at a slight discount to book value and just 7.5x future earnings.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 3. CNOOC Limited (CEO)
Trades at 11x future earnings and carries very little risk thanks to a huge regulatory advantage. Has the exclusive right to share in the production of China’s offshore resources when discovered by a foreign firm, shielding CNOOC from local exploration costs.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 4. Knightsbridge Tankers Limited (VLCCF)
Dividend has recovered nicely from 2009′s cut, and is now paying nearly 9% as shares have failed to properly react to improved prospects. Company secured a $175 million credit facility in 2010 that will enable the purchase of a ninth vessel without raising additional equity.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 5. Life Partners Holdings, Inc. (LPHI)
Looked like it was finally heading toward a proper valuation before a string of bad press held shares down. With zero debt, a 5.3% dividend yield, and a forward earnings multiple of just 7.4, an investment in this unconventional business possesses a huge margin of safety.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 6. Diamond Offshore Drilling, Inc. (DO)
Diamond Offshore has supplemented its modest regular dividend with 15 special payouts since 2006, returning an incredible total of $27.13 per share to stockholders over that span (or 41% of its current share price).
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 7. Jinpan International Limited (JST)
The Chinese manufacturer split its shares and tossed shareholders a 17% dividend hike this year, with little reaction from the market. Will close 2010 with a yield of 1.3%, much better than the 0.49% it opened the year with.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 8. Amtrust Financial Services (AFSI)
Shares deservedly surged over the second half of the year (+46%), but still trade at just 1.5x book value and 7x expected 2012 earnings. Dividend has quadrupled since 2006, yet forward payout ratio remains at just 13%.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 9. Annaly Capital Management, inc. (NLY)
By far the best value for your REIT-buying dollar. That is, if you’re looking for a REIT that managed to improve its dividend every year through the recession, currently yields 14%, and will set you back less than 7x next year’s earnings.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 10. Fifth Street Finance Corp. (FSC)
The most attractively-priced BDC has only been public since 2008, but it sports an under-leveraged balance sheet, a 10% dividend yield, and trades at only a slight premium to its tangible book value.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 11. Lincoln Education Services Corporation (LINC)
Lincoln instantly became the best dividend-paying value in the for-profit education industry when it declared its first payout in November. Yields 6.4% and trades at 7x next year’s conservative earnings consensus.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 12. Chevron Corporation (CVX)
The best value among the integrated energy giants trades at just 9x next year’s earnings, compared to 10.6 for ConocoPhillips and 11.3 for ExxonMobil.
13. BHP Billiton Limited (BHP)
The Australian mining giant is diversified enough to weather the volatile commodity markets, and rich enough to acquire growth while returning an increasingly-substantial amount of cash to shareholders.
The 100 Best Values Among Dividend-Paying Stocks to invest 2012 14. PartnerRe Ltd. (PRE)
Trades at a 20% discount to book value, and the international reinsurer has raised its dividend every year since 1994 – increasing its rate by a total of 450% during that span.
15. Seadrill Limited (SDRL)
The offshore driller has achieved double-digit top line growth every year since going public in 2005, and is currently on pace to triple its 2006 revenue.
16. Intel Corporation (INTC)
A flat year leaves Intel shares with a dividend yield (3.43%) well above its five-year average (2.30%), thanks to the giant chipmaker’s biggest dividend hike since 2006.
17. Alliance Resources Partners, L.P. (ARLP)
Trades at 9x future earnings, yields 5%, has tripled its dividend rate since 2003, and raised its payout for 11 straight quarters.
18. Acme United Corporation (ACU)
An income investor’s dream: Stock is undervalued (1.2x book, 9.4x future earnings), current yield is solid (2.4%), payout ratio remains low (23%), and commitment to dividend growth is clear (boosted rate by an average of 16% annually since 2005).
19. CF Industries Holdings, Inc. (CF)
With revenue and earnings on pace to beat last year’s figures by 50% and the fertilizer company’s forward payout ratio now below 4%, it’s about time for another monster dividend hike from CF, which quintupled its payout in 2008.
20. Suncor Energy Inc. (SU)
Added earning power from Petro-Canada acquisition enabled Suncor to double its dividend without pushing its forward payout ratio over the 20% threshold.
21. Marathon Oil Corporation (MRO)
Despite an expected 23% jump in revenue, Marathon barely traded above book value in 2010. Its year-end price/book ratio (1.18), compares favorably to those of competitors Chevron (1.80), ConocoPhillips (1.44), and ExxonMobil (2.57).
22. VSE Corporation (VSEC)
If you know of any other companies with seven straight years of double-digit dividend growth, seven straight years of double-digit earnings growth, and a forward payout ratio under 5%, please fill me in.
23. TICC Capital Corp. (TICC)
If you’re looking for exposure to the tech industry but don’t want to sacrifice yield, TICC is worth looking into. The tech-focused BDC trades at just a 38% premium to tangible book value, carries no debt, and sports an 8.6% dividend yield.
24. National Presto Industries Inc. (NPK)
The do-it-all manufacturer (Skillets! Ammunition! Diapers!) currently carries a dividend rate seven times the amount paid to NPK shareholders in 2003. Revenue momentum, diversification, and overall financial efficiency should support continued dividend growth.
25. National Interstate Corporation (NATL)
With a forward payout ratio of just 16% despite getting annual raises that have averaged 19% since 2006, this dividend is primed for continued growth.
26. Archer Daniels Midland Company (ADM)
Shares scuffled enough this year to keep their forward earnings multiple under 10 and their yield above 2%, two figures you don’t expect when researching a company that’s quintupled its revenue over the last decade and raised its dividend for 35 consecutive years.
27. Compania de Minas Buenaventura SA (BVN)
Buenaventura offers exposure to both gold and silver, as well as zinc and lead. The Peruvian mining company has low production costs, very little debt, upward dividend momentum, and has quadrupled its top line since 2003.
28. Guess?, Inc. (GES)
Since 2007, my #1 apparel value has managed to boost its dividend (+150%) and revenue (+40%) at impressive rates, recession or not. I can’t wait to see what happens when the economy isn’t terrible.
29. Huaneng Power International, Inc. (HNP)
China’s largest independent electricity producer pays a 5.8% dividend (based on this year’s payout), has fantastic growth momentum (and even better growth prospects), and trades at just a 5% premium to its book value.
30. Textainer Group Holdings Limited (TGH)
The promising young dividend received three more increases in 2010, giving it a total of six since TGH went public three years ago. The stock now yields 3.8%.
31. Novartis AG (NVS)
Even with shares up 11% in December, Novartis remains my #1 pharmaceutical value heading into 2012. The company has given shareholders a double-digit raise in four consecutive years, averaging a 22% annual increase over that span.
32. Analog Devices, Inc. (ADI)
The analog chipmaker has recovered nicely from last year’s revenue decline, pushing its top line up by nearly 50% in 2010 thanks to a bounce in semiconductor demand and the revival of the auto industry. ADI has more than quintupled its dividend rate since 2003.
33. Merck & Co., Inc. (MRK)
Dividend growth has been non-existent for way too long. But revenue, expansion prospects, and margins are all looking up following the Schering-Plough acquisition, all of which should contribute to solving the flat dividend issue sooner than later.
34. Microchip Technology Inc. (MCHP)
Microchip carries by far the highest dividend yield (4.01%) among the many great chipmakers on this list, and continues to give shareholders a slight raise every quarter.
35. Ensco plc (ESV)
The offshore driller has a clean balance sheet, fantastic margins, and trades at a solid valuation. But most importantly, Ensco gave shareholders a 1300% raise in 2010, pushing its yield into relevancy (2.7%).
36. Yamana Gold Inc. (AUY)
It took a late-year plateau in the price of the precious metal and a few aggressive dividend developments, but I did manage to squeeze one gold play onto this list.
37. NewMarket Corporation (NEU)
NewMarket has increased its dividend rate by a staggering 252% since 2006. With solid revenue momentum and a forward payout ratio of just 13%, that fantastic dividend growth should continue.
38. Main Street Capital Corporation (MAIN)
Since its late-2007 IPO, Main Street has doubled both its revenue and shareholder equity. The stock trades at just 13x next year’s earnings with an 8.5% dividend yield.
39. China Mobile Ltd. (CHL)
Holds the world’s largest subscriber base and a dominant market position in China, where mobile penetration is still relatively low (60-65%). Trades at less than 11x earnings, which should only rise as CHL uses its scale to swallow up low-cost growth in rural areas.
40. Atlantic Tele-Network, Inc. (ATNI)
A late-year overreaction to disappointing 3Q results — coupled with a 13th consecutive year of dividend growth — has pushed ATNI’s dividend yield up to 2.4%. That’s well above the 1.59% it was paying coming into 2010.
41. Texas Instruments Incorporated (TXN)
Since holding its dividend rate flat from 1996 until 2004, TI has now increased it sixfold. The company also authorized the repurchase of $27.5 billion in stock over that same period, with nearly $20 billion completed before the stock began its recent surge (+40% since August).
42. Prospect Capital Corporation (PSEC)
The energy-focused BDC has achieved at least double-digit revenue growth every year since its 2004 IPO, carries zero debt, yields 11%, and trades right at tangible book value.
43. Sanderson Farms, Inc. (SAFM)
My top-ranked packaged food company sports a forward payout ratio of just 18% despite averaging 20% annual dividend growth since 2001.
44. Murphy Oil Corporation (MUR)
Murphy’s recent exploration success could allow it to blow its previous growth figures out of the water. Which is pretty impressive, considering the company has boosted its revenue by double-digits in seven of the last eight years.
45. Corning Incorporated (GLW)
Corning’s top line is making a nice recovery following a 2009 decline. The company is increasingly dependent on its display technology business, which isn’t necessarily a bad thing for the time being.
46. Pfizer Inc. (PFE)
Pfizer already has the widest economic moat in the pharmaceutical space. And depending on what it does with that $20 billion war chest, that economic moat will either get wider or get much wider.
47. UnitedHealth Group Inc. (UNH)
United finally made the leap to dividend relevance when it shifted from an annual payout of $0.03 per share to a quarterly dividend of $0.125 per share – a modest 1567% increase.
48. American Eagle Outfitters (AEO)
Shares of AEO fell about 15% this year despite the company’s 10% dividend hike, pushing the stock’s dividend yield over the 3% threshold heading into 2012.
49. Republic Bancorp, Inc. KY (RBCAA)
Even with its stock up 15% for the year and an inevitable decline in its important tax-loan segment on the horizon, Republic Bancorp remains the finest value among regional bank holding companies.
50. Cypress Sharpridge Investments, Inc. (CYS)
Cypress trades right around its tangible book value, where it carries the highest dividend yield (18%) on this list. (Be sure to factor December’s 14 million share offering into your research.)
51. Omega Healthcare Investors, Inc. (OHI)
The healthcare facility REIT yields 6.7% and is one of the few real estate companies to maintain strong dividend and earnings growth through the recession, yet it trades at just 11x next year’s earnings.
52. L-3 Communications Holdings, Inc. (LLL)
Dividend has received annual boosts averaging 27% since 2004, and yet forward payout ratio sits under 20%. L-3 will need that buffer to keep growing its dividend in the face of defense spending cuts, however.
53. The Andersons, Inc. (ANDE)
The diversified agriculture and transportation company seems to have recovered nicely from its 2009 revenue hiccup. The Andersons increased its dividend for the 14th consecutive year by handing shareholders a 22% raise in December.
54. Harris Corporation (HRS)
Harris has increased its dividend rate tenfold since 2002, but kept its forward payout ratio under 20% by tripling its revenue over the same period.
55. Advance America, Cash Advance Centers (AEA)
The largest payday loan generator in the country has pristine valuation metrics, including a forward P/E ratio of just 6, but regulatory concerns make it the ultimate risk/reward play. Investors will be paid handsomely (4.6% dividend yield) to stick it out.
56. The Buckle, Inc. (BKE)
Counting the monster year-end special dividends that have become an annual tradition, The Buckle has grown its dividend output tenfold since 2006.
57. Greif, Inc. (GEF)
Blows away its fellow container manufacturers in most metrics, but especially price/book (2.2) and debt/equity (0.8) ratios. Seven consecutive years of healthy dividend hikes have produced a 478% increase to Greif’s dividend rate and a 2.7% yield.
58. MCG Capital Corporation (MCGC)
Currently sporting an 8% yield, with a solid dividend hike likely looming. MCG has a 77% forward payout ratio in an industry required to return 90% of its taxable earnings to shareholders.
59. Xilinx, Inc. (XLNX)
Even after sharply downgrading its revenue outlook in December, Xilinx remains a solid value. Apparently I’m not the only one who sees it that way, as shares of XLNX actually went up in the days following the announcement.
60. DeVry Inc. (DV)
Even with their late-year push, shares of DV lost 15% of their value in 2010. They now sit below 10x the conservative 2012 earnings estimates laid out by regulation-wary analysts.
61. Microsoft Corporation (MSFT)
Unlike the Zune, Mr. Sofee’s successful transition to a dependable income investment (six straight years of double-digit dividend growth) should not be ignored.
62. RPC, Inc. (RES)
The oil and gas services company recovered nicely from last year’s dividend cut by raising its payout twice in 2010, exceeding earnings expectations, and splitting its stock.
63. Strayer Education, Inc. (STRA)
By far my most controversial pick of 2010, I recommended Strayer at $132 in October and I still think it has plenty of juice as it hovers around $160 today – more than $100 short of its 52-week high.
64. Nucor Corporation (NUE)
Since 2005 alone, the steel giant has raised its dividend rate by 383% and paid an additional $4.785 per share in special payouts.
65. PennantPark Investment Corp. (PNNT)
The last time shares of PNNT traded this high was 2007, when the company was generating half as much revenue and wasn’t even profitable.
66. ConocoPhillips (COP)
Recent acquisitions were poorly-timed, resulting in a rough couple of years for the energy giant. On the bright side, the stock barely trades at 10x next year’s earnings, and sports a dividend yield (3.30%) that blows away its five-year average (2.70%).
67. Sunoco Logistics Partners L.P. (SXL)
The success SXL has achieved since being spun-off from Sunoco in 2002 could be hard to replicate moving forward, but anything close would just be gravy on top of that solid 5.7% dividend yield.
68. Eli Lilly & Co. (LLY)
Facing a steep patent cliff, the company opted not to raise its dividend in 2010 for the first time in 42 years. Here’s to hoping they use the capital to juice their earnings in one way (R&D) or another (M&A).
69. Occidental Petroleum Corporation (OXY)
Ten dividend increases — including seven of at least 10% — since 2003 have boosted the company’s payout by a total of 268%. Yet it still maintains a payout ratio under 30%.
70. Triangle Capital Corporation (TCAP)
Shares of TCAP continue to establish new highs as the year comes to a close, yet they still sport a 9% yield thanks to the BDC’s aggressive dividend growth (nine raises for a total increase of 180% since 2007).
71. PPL Corporation (PPL)
The energy and utility holding company delivers electricity to customers from Montana to England, pays a dividend yield of more than 5%, and has raised its payout in nine consecutive years.
72. Meadbowbrook Insurance Group, Inc. (MIG)
Priced at less than book value and under 10x next year’s earnings, Meadowbrook is an excellent value with strong dividend growth prospects.
73. MFA Financial, Inc. (MFA)
My only complaint about this mortgage-centric REIT is the inconsistency of its dividend, which has upward momentum but tends to meander slightly from quarter to quarter. That still produces a yield in the 10-12% range, however.
74. AFLAC Incorporated (AFL)
Shareholders continue to benefit from Aflac’s competitive pricing, achieved by offering its products at the workplace rather than targeting individuals. The company has tripled its payout since 2003, and given shareholders a raise in 28 consecutive years.
75. Dynex Capital (DX)
Very comparable to MFA Financial. You’ll pay a higher earnings multiple to get a little less yield (10%), but the dividends are more consistent and a little better covered.
76. KLA-Tencor Corporation (KLAC)
Current yield (2.53%) isn’t nearly as attractive as it was before the stock rose 40% over the second half of the year. But the company has more than doubled its dividend since 2006, and is on pace to double its revenue this year, so don’t expect that return to lag for long.
77. Maiden Holdings, Ltd. (MHLD)
The reinsurance provider is trading at a 24% discount to book value and less than 7x next year’s earnings, and carries a 3.5% dividend yield to boot.
78. Canadian Natural Resource Ltd. (CNQ)
Revenue is bouncing back nicely from its 2009 drop, and the board of directors isn’t being stingy with the returns, doubling the dividend rate in May.
79. Exxon Mobil Corporation (XOM)
Exxon’s first year of sub-5% dividend growth since 2002 is an anomaly, not an issue. The company still possesses a low forward payout ratio (27%), and its yield (2.4%) sits well above its five year average (1.9%).
80. Global Partners LP (GLP)
Has averaged a 24% return on equity since going public in 2005, allowing the company to push the limits of its payout ratio in favor of a fat 7% dividend yield.
81. American Equity Investment Life Holding (AEL)
The fixed annuity and life insurance underwriter has given shareholders a double-digit raise every year since initiating its dividend in 2003, and currently trades at a healthy discount to tangible book value.
82. CenturyLink, Inc. (CTL)
Qwest merger should be completed early in 2012, which will undoubtedly push payout ratio into more manageable territory, buoying the current 6% dividend yield.
83. Stryker Corporation (SYK)
My #1 medical equipment/supplies value heading into 2012. Has better revenue momentum and payout ratio than Medtronic, which should keep its streak of 11 straight years with double-digit dividend growth rolling.
84. ACE Limited (ACE)
This insurance/reinsurance company has managed to push its yield above 2% through 18 consecutive years of dividend growth, all while keeping its forward payout ratio under 18%. And it’s currently trading at less than book value and just 8x future earnings.
85. Magna International Inc. (MGA)
A huge beneficiary of the auto rebound, Magna seems to have fully recovered from its dividend suspension. Stock is constantly threatening its all-time high, yet still trades at just 1.6x book value and 11x future earnings.
86. CapLease, Inc. (LSE)
It may be a while before the office space REIT achieves a dividend rate in the ballpark of its 2009 peak. But the current 4.4% yield isn’t too shabby in the meantime, especially coming from a stock that will only set you back about 8x future earnings.
87. Montpelier Re Holdings Ltd. (MRH)
Montpelier has averaged a 25% annual return on shareholder equity since its 2002 IPO. The stock is currently trading at a 20% discount to tangible book value, with a 2% dividend yield
88. Capital One Financial Corp. (COF)
Capital One was one of the many financial companies to slash its dividend during the crisis, and yet its payout is still nearly double its stable 1995-2007 level. Trades at a much steeper discount to book value than similar institutions.
89. Bunge Limited (BG)
Has increased its dividend by an annual average of 11% since it began returning cash to shareholders, and that shouldn’t slow down any time soon. Earnings have much greater momentum, keeping forward payout ratio below 20%.
90. Applied Materials, Inc. (AMAT)
This young payout produces a 2% yield, with plenty of upside. Currently pays just 21% of future earnings to shareholders, despite more than doubling dividend rate since 2005 inception.
91. Walgreen Company (WAG)
A solid value with a payout in danger of plateauing: dividend rate has grown more than twice as fast as sales over the last six years, which obviously can’t continue forever.
92. Walter Energy, Inc. (WLT)
The coal producer’s breakout 2010 (revenue is on pace to grow by 70%) will support its aggressive dividend growth, possibly even pushing it into meaningful territory. The company has doubled its dividend rate since 2008, but still holds a forward payout ratio under 5%
93. Westwood Holdings Group, Inc. (WHG)
Even without counting the special dividends sprinkled in from time to time, WHG has improved its dividend rate by an average of 70% annually since 2003. But you’ll pay for the growth, as the stock currently commands the highest earnings multiple (23.7) among the 100 on this list.
94. Thor Industries, Inc. (THO)
Shares took a double-digit tumble following Thor’s disappointing Q1 earnings report. which proved to be a quality buying opportunity, as the stock has since recovered to its pre-earnings level. A lot hinges on the success of the Heartland RV acquisition, so watch closely.
95. Vodafone Group Plc (VOD)
Net of fees, the mobile communications giant has more than quadrupled its dividend since 2003, pushing the stock’s yield to nearly 5%. Acquiring shares of VOD will currently cost you less than book value, and a little under 10x future earnings.
96. CME Group, Inc. (CME)
After giving shareholders a raise of at least 30% in each of its first five years as a dividend-paying company, CME held its payout flat through the recession. Can it regain its momentum? Taking a chance will barely cost you book value.
97. Medtronic, Inc. (MDT)
Shareholders should be thrilled if the next two decades are even half as good as the last two, which produced average annual dividend growth of 20%. Oh, and the stock went up more than 1200% as well.
98. Best Buy Co., Inc. (BBY)
Shares plunged more than 18% following the electronics retailer’s final earnings report of 2010, and now trade at less than 10x future earnings. The dividend has doubled since its 2003 inception, and is primed for more growth with a forward payout ratio of just 16%.
99. AstraZeneca plc (AZN)
Priced at just 7x future earnings amid a struggle to win FDA approval for Brilinta, the ultra-efficient AZN will be paying its shareholders a well-covered 5% dividend yield while they wait for their shares to bounce back.
100. Franklin Resources, Inc. (BEN)
The investment management company may not feature an impressive yield (0.87%), but it’s not for a lack of trying. With 30 consecutive years of dividend growth, including a quadrupling of its payout over the last decade, BEN is a classic low-yield, high-growth dividend play.
