Three for Four: 3 Dividend Stocks With Over 4% Yields
We found three quality stocks with great yields.
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If you look, you can still find quality, leading companies out there with high dividend yields well above 4% -- far more than the measly average offering of the S&P 500 stocks.
These three stocks here have leadership positions in their industries, dividend yields above 4% and secure dividend payouts.
Smell the Flowers Foods
Flowers Foods FLO opened its first bakery in 1919 and has since become one of the largest producers of packaged bakery foods in the United States, operating 46 bakeries in 18 states. Well-known brands include Wonder Bread, Home Pride, Nature's Own, Dave's Killer Bread, Tastykake and Canyon Bakehouse.
The company operates in two segments: Direct-Store-Delivery (DSD) and Warehouse Delivery, with around 85% of the company's product being delivered directly to stores. Fresh breads, buns, rolls, and tortillas make up about a three-fourths of the business, with sales channels for the company split between supermarkets, mass merchandisers, food service, and convenience store.
Flower Foods in late May increased its quarterly dividend 4.5% to $0.23, extending the company's dividend growth streak to 21-consecutive years. Flowers Foods reported third quarter earlier this month, revealing revenue increased 3.5% to a third quarter record $1.2 billion, but this was $10 million below estimates. Adjusted earnings per share equaled $0.29 compared to $0.30 in the second quarter of 2022, but was $0.01 better than expected.
As with previous quarters, Flowers Foods did see higher raw material costs and supply chain issues during the quarter that impacted results, but the company was able to continue to raise prices in nearly all areas to compensate for these headwinds.
Flowers has been a solid producer in good times or bad, led by its iconic brands. It's in a recession-resistant industry, with nearly 99% of households buying fresh packaged bread. The company posted earnings-per-share of $0.57, $0.63 and $0.66 during the 2008 through 2010 stretch. Moreover, the dividend was increasing during this time as well. Further, 2020 results proved to be quite impressive despite the recession.
FLO stock has a high dividend yield of 4.4%.
Take the Trip to Trinity Industries
Trinity Industries TRN is a leading provider of rail transportation products and services in North America. The business of the company is classified primarily under two reporting segments: Railcar Leasing, which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; and the Rail Products Group, which manufactures and sells railcars and related parts and components and provides railcar maintenance and modification services.
The company in August revealed second quarter earnings, showing an an adjusted EPS of $0.23, missing estimates by $0.08. The company reported revenues of $722 million for the quarter, up 73.1% year over year. Trinity Industries demonstrated a lease fleet use rate of 97.9% at the end of the quarter, indicating efficient use of its leased assets. The Future lease rate differential (FLRD) also stood at a positive 29.5%. The company delivered 4,985 railcars during the quarter and received new orders for 4,770, reflecting strong product demand.
Trinity Industries generated year-to-date cash flow from continuing operations of $103 million. Moreover, the adjusted free cash flow, which accounts for investments and dividends, amounted to $36 million. These highlights illustrate Trinity Industries' positive financial performance, with notable revenue growth, solid earnings per share, high lease fleet use, substantial railcar deliveries, and healthy cash flow generation during the quarter.
While headwinds in the train Products group's margins continue, hiring and retention rates, train service levels, and supply chain issues are all improving, according to management. Finally, the management maintains its EPS target at $1.50 to $1.70, reflecting year-over-year revenue and margin growth for 2023.
The near-term outlook has improved with the re-opening after Covid lockdowns and increased demand reflected by the current book-to-bill ratio of 5 times. Moreover, in October 2022, the company announced a multi-year contract with GATX, under which Trinity has been contracted to build and deliver 15,000 new tank and freight railcars over a period of six years. Additionally, GATX has the option to add 500 more cars each year. This order is valued at $1.9 billion.
TRN stock yields 4.3%.
Meet the Interpublic Group of Companies
The Interpublic Group of Companies IPG provides advertising and marketing services worldwide. Its operations are well diversified amongst consumer advertising, digital marketing, communications planning, media buying, and data management services. The company dates back to 1902. It has massively grown since then, currently generating close to $11 billion in annual revenues.
Interpublic reported its third-quarter results in October, showing net revenues rose by 0.6% to $2.31 billion compared to last year. This was derived from favorable foreign exchange translation of 0.7% and a net positive effect of 0.3% from acquisitions, offset by an organic decline of 0.4%. This decline was mainly due to higher interest expenses and a larger provision for income taxes compared to last year.
During the first nine months, IPG bought back $219 million worth of stock. Thus, despite the small decline in net income year-over-year, EPS was stable at $0.64 While uncertainty persists as a result of the ongoing macroeconomic turmoil, management believes that the strongest growth areas of its business, such as public relations, healthcare marketing, experiential marketing, and commerce, will continue to perform well.
To reflect the international segment's strong growth, the ongoing margin expansion, and the ongoing, substantial share buybacks, we retain our EPS growth estimates at 7%. Embedding digital elements across the portfolio and adding a layer of data and tech to its offerings should also contribute positively to earnings.
Further, we retain our dividend growth estimates at 6.5% to reflect the company's healthy payout ratio and most recent dividend increase. The company's payout ratio has increased over the past decade as DPS growth has outpaced earnings growth. The dividend remains well-covered, nonetheless.
IPG stock yields 4.1%.
At the time of publication, Ciura had no position in any security mentioned.