Looking For A New Dividend Stock?
The new kid on the block…
It someone everyone wants to get to know. And when it comes to dividends this is no different.
I looked around and I found three companies who just started paying dividends (or will pay Dividends soon).
The question is… are any of these new guys worthy of our hard earned money?
Should we toss some cash their way and start collecting the dividends?
Let’s do some analysis on each dividend paying company… and then you can toss out your thoughts. I think the Stock I chose will shock you!
The Three New Guys on the block are:
Gilead Sciences Inc. (GILD)
Navios Maritime Midstream Partners L.P. (NAP), and
Bed Bath & Beyond Inc. (BBBY)
Let’s look at each one.
New Dividend Stock #1 Gilead Sciences (GILD)
Gilead is a Biopharmaceutical company. This is the type of company that one day might save your life. They produce a ton of different medicines including: Genvoya, Stribild, Complera/Eviplera, Atripla, Truvada, Viread, Emtriva, Tybost, and Vitekta.
The company often markets its products in conjunction with third-party distributors and corporate partners. Gilead has collaboration agreements with Bristol-Myers Squibb Company, Janssen R&D Ireland, Japan Tobacco Inc., and Galapagos NV.
The company started paying a dividend about 1 year ago, with a robust payout of $0.43 per quarter… or $1.72 a year. Not bad.
The company has a market cap of $127 billion, and did $32 billion in top line sales last year.
Right now the dividend yield on the company is only 2%. Why do I say Only? Because the payout ratio is 10%. Which is crazy low. I could see the Board of directors making a dividend increase very soon.
Operationally this company is a stud… gross margins run 87% and profit margins are over 50%! EPS is an amazing $11.93 a share.
So plenty of money to go around.
When you look at overall value of the business you’ll also see the P/E ratio is a low 7.1x… very low for a company of this size / performance.
Overall a big company with a super low dividend payout and big earnings… could this be the one?
Is it better than the next player?
New Dividend Stock #2 Navios Maritime Midstream Partners L.P. (NAP)
I don’t know that you can get much more different in this next dividend payer. Navios is a shipping company.
They get payed to move goods from one part of the world to the other. Simple right? Their specialty is Crude oil tankers, Refined product tankers, chemical tankers, and petroleum gas tankers.
According to the website, the business has 6 VLCC tankers most under long term contract. The average length of the contract is 5.1 years…. With 2016 and 2017 fully booked.
Compared to the other new dividend payers, Navios is tiny. The company reports a market cap of $233 Million! And, last year’s revenue was $83 million. Like I said Tiny.
So what’s nice about the numbers?
Despite the small size, this company is paying out a huge dividend. The company started its dividend in early 2015… and since then it has climbed slowly, from $0.413 per quarter to $0.423 a share.
EPS was $1.44, and the company pays a dividend of $1.69. A little scary given the payout ratio is 114%.
In other words, they paid out more than they earned. Can they keep that up? Probably not. The solutions are threefold… either cut the dividend… or make more money… or both.
The only reason I’m not to worried… the fact the company has booked out charters 100% for the next 2 years.
At the end of the day, the company pays a FAT dividend of 13.7% which is stunning!
Might this tiny company with a massive payout be our pick for the new dividend payer?
The Last company to look at is a retail business.
New Dividend Stock #3 Bed Bath & Beyond Inc. (BBBY)
This third newcomer is so new, they have yet to pay their first dividend.
Yep, talk about cutting edge info…
BBBY is scheduled to make its first payout of a dividend in mid-July of this year.
Let’s jump into the numbers.
BBBY has a Market cap of 7 billion and reported revenue in the last 12 months of $12 billion.
They generated EPS of $5.14 a share, and have a very low P/E of 8.8x. (As we’ve mentioned before, a P/E of that level is low and indicates the company may be undervalued.
The Cash Dividend will be $0.50 a year, paid quarterly, which gives the stock a yield of 1.1%. Not a bad start. A little rough math indicates the Payout ratio will be near 10% which leaves lots of room for future increases.
The concern, the 5 year growth projections are only 3.8%… which is very low and the company’s profit margins are a low 7%.
I think this is a company that’s just dipping its toe into the dividend paying waters, and the board is taking a very conservative move forward. I could see the dividend start to move higher in the coming quarters as the comfort level increases.
So which of the three new dividend stocks would you add to your portfolio?
Would you pick the giant biopharmaceutical company, the tiny shipping company, or the mid-sized retailer with the low payout ratios?
What I’m going to say is a bit off the beaten path…
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