2 A-list dividend stocks
These healthcare-related names score highly for quality, payout growth, and performance potential.
By J. Royden Ward, Cabot Benjamin Graham Value Letter
In addition to strong dividend records, to meet my criteria a stock had to offer strong chances of outperforming the market during the next six to 12 months. I also looked for high-quality companies with an S&P Quality Rating of A+, A or A-. Last, I looked for companies with excellent prospects for the year ahead.
Aflac is the world's largest supplemental cancer insurance provider, deriving 75% of its business from Japan.
Most of Aflac's policies are individually underwritten and marketed at worksites through independent agents, with premiums paid by the employee. Aflac Japan provides insurance to one out of every four Japanese households.
Aflac has expanded its product line and added new marketing venues in recent years. Non-cancer insurance policies now account for 70% of new sales.
AFL shares sell at 9.8 times latest earnings per share and are rated medium risk. Lower risk in Aflac's bond holdings and further successes in Japan will produce strong growth in future years.
The 2.4% dividend yield adds significant value. The quarterly dividend is 6% higher than a year ago.
The dividend payout ratio for AFL is a very conservative 23% -- well below my maximum target of 50%. Aflac's dividend has been increased every year for more than 25 years.
CVS Caremark is the leading pharmacy and drug management services chain. During the past several years, it has made several major acquisitions that have enhanced CVS's growth beyond expectations.
The company's latest purchase of UAM Medicare prescription drug plan business is producing better than expected sales and earnings results. CVS will likely continue its aggressive acquisition strategy in future years.
CVS's in-house Minute Clinics, which are staffed by nurse practitioners and physician assistants, are a big hit.
New drugs and the wider use of generic drugs will keep earnings growing rapidly well into the future. Additional acquisitions could push sales and earnings higher than expected.
CVS shares are undervalued at only 15.7 times latest 12-month earnings per share. The dividend yield of 1.5% is modest, but I forecast dividend growth of 19% per year during the next five years. The balance sheet is strong, and my risk rating for CVS is very low risk.
CVS has paid a dividend every year since 1916. The quarterly dividend is 38% higher than a year ago.
CVS is included in my list of A-List Dividends because of its 16% dividend growth during the past decade. The dividend is well-covered by earnings per share -- 24% is half my maximum target of 50%.
More from TheStockAdvisors.com
2.4 and 1.5 percent?????????????????????
Sound slike somebody wants to pump and dump some stocks here.......
Retailers and spending must go up for these companies to get back into the game. Return sucks!! I would look at aflac on a big pull back. Otherwise, safe is T and VZ.
MSFT got some news, they are either taking out players or going to be one! When that starts it might get a little interesting. Too bad they are not as swift to the market like AAPL. X-box one has potential and will see on the windows phone!
Syria, Syria...Comodity is oil, Missiles is BA. Long Chaos for sure. Too much on the plate you think? Debt ceiling! Syria! Taper! No real good news anywhere, housing is the exception.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The 8,000th model has rolled off the assembly line. There's a reason it's the best-selling airplane of all time.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.