Investors get two sources of income from investments: dividends and capital gains. If the company is growing its earnings, it will increase its dividend payments to its shareholders, which could in turn help boost the company’s stock price. In this post I screen for companies that might provide suitable income to investors by using the following criteria: (1) the dividend yield is higher than 4%, (2) the dividend growth rate (in ten years) is more than 30%, (3) the market cap is larger than $1 billion, (4) the payout ratio is maximum 60%, and (5) the EV/EBITDA is less than 10. Here are the three top companies that I found.
Highly leveraged media company
Rogers Communications Inc. (USA) (NYSE:RCI) is a diversified media company, operating in four main business segments: Wireless, Cable, Business Solutions and Media. Most of its operating revenue in the first quarter of 2013, CAD 1.76 ($1.67) billion, or 58% of its revenue, was generated from the Wireless segment, while the Cable segment ranked second with CAD 861 ($815) million in revenue. Those two segments are also the two big operating profit contributors, delivering CAD 765 ($724) million and CAD 429 ($406) million, respectively, in first quarter profits. What makes me worry about the company is its weak balance sheet. As of March 2013, it had nearly CAD 4 ($3.78) billion in equity, CAD 1.43 ($1.35) billion in cash and as much as CAD 10.8 ($10.22) billion in both long and short-term debt.
In the past ten years, Rogers Communications Inc. (USA) (NYSE:RCI) has increased its dividends from CAD 0.05 ($0.05) in 2003 to CAD 1.58 ($1.50) in 2012, marking annualized growth of more than 41%. The payout ratio is quite decent, at only 47.6%. Rogers is trading at $38.80 per share, with the total market cap of $20 billion. The market values Rogers Communications Inc. (USA) (NYSE:RCI) at only 6.47 times its trailing EBITDA (earnings before interest, taxes, depreciation and amortization). The dividend yield seems to be quite juicy, at as high as 4.4%. For the full year 2013, Rogers Communications Inc. (USA) (NYSE:RCI)expected to generate around $4.86 billion to $5 billion in adjusted operating profit, with the pre-tax free cash flow coming in at $2 billion. The annual dividend might reach $1.74 per share for the full year 2013.
Credit: Rogers Communications Inc. (USA) (NYSE:RCI)
The MLP with high yield
Terra Nitrogen Company, L.P. (NYSE:TNH) is limited partnership operating as nitrogen fertilizer product manufacturer, selling 2.4 million tons of nitrogen fertilizer for more than $780 million in net sales and $560.8 million in net earnings in 2012. The majority of its sales, $571.2 million, or 73.2% of the total revenue, was generated from the sales of UAN, while $204.3 million in sales came from Ammonia products. CF Industries Holdings, Inc. (NYSE:CF) owns around 75% of the total outstanding common units and all of its Class B common units.
In the past ten years, Terra Nitrogen Company, L.P. (NYSE:TNH) has paid consistently positive but fluctuating dividends. The dividend has been on the rise, climbing from $0.25 per share in 2003 to $16.86 per share in 2012. In the past twelve months, its dividend per share stayed at $15.96 per share, with the payout ratio of 34.7%. Terra Nitrogen is trading at $218.40 per share, with a total market cap of $4.1 billion. The market values Terra Nitrogen at only 6.11 times its trailing EBITDA. Terra Nitrogen offers quite a juicy yield, at 8.6%.