3 stocks delivering dividends plus growth

Income-seeking investors don't have to settle for yields. These companies offer more.

By Traders Reserve Jan 10, 2014 9:58AM
Man working in data center © Erik Isakson, Tetra images, Getty ImagesBy Karen Riccio


It would be easy to go through a database of stocks, filter out the five highest-yielding ones, and whip up an article touting their income-generating prowess.


However, I'd be doing a great disservice to investors if I did.


It's not always the case, but some companies dole out excessive yields because their stock prices are low or they have failing business models, or both. It's a great way to lure in dividend-myopic investors who don't read the fine print about earnings and cash flow.


It's far better to seek out companies that pay a 2 percent to 3 percent dividend that intend to grow that dividend -- and earnings -- over time. Besides, if it's outpacing inflation, there's no immediate reason to get greedy.


Unfortunately, greed is as dirty a five-letter word as growth when it comes to dividends. For example, investors in phone and Internet carrier CenturyLink (CTL) were caught off guard in February 2013 when the company said it would cut its dividend by 26 percent.

 

Stocks with the best of both worlds

Shares of CTL fell 23 percent in response, the most they had in three decades, and $6 billion in market value evaporated. Although CenturyLink is still delivering a 6.8 percent dividend, the stock remained down 21 percent for 2013, and left plenty of doubt in investors' minds.

 

The cut, made to promote a more flexible stock buyback program, raised the eyebrows of many analysts. It should raise yours as well; knowing that CEOs giveth and taketh away dividends at their own discretions.

 

If you need to generate income, it's entirely possible to get the best of both worlds: companies that pay steady dividends and deliver growth to boot. Think this is just another too-good-to-be-true story? Think again. Here are three stocks that do just that.

 

CA Technologies (CA)

CA Technologies is involved in a rapidly growing and necessary part of IT. It's called Data Center Infrastructure Management, or DCIM. Rather than go into eye-glazing detail about what it does, let's just focus on this business's staggering market potential. Fewer than 10 percent of mid- to large-sized data centers utilize it, and 451 Research says DCIM supplier revenue will reach $1.8 billion by 2016, representing a 44 percent compound annual growth rate.

 

While migrating away from mainframe services, ala IBM, CA Technologies, a $15 billion DCIM provider, is also focusing on growing its cloud market share. Cloud is estimated to become a $148.8 billion global market in 2014, $160 billion in 2015, and $207 billion in 2016. Known for having a strong pipeline and healthy financial books, CA Technologies ended 2013 up 44 percent and the stock currently yields 3 percent.


CTC Media (CTCM)

This small-cap media company has the backing of the Russian government due in part to its owner Yury Kovalchuk's longtime friendship with President Vladimir Putin. CTC Media also happens to operate three of the most popular television networks in Russia. Plus, it will take on a joint e-commerce project with Russia's largest online retailer to launch a very in-demand line of women's clothing in April 2014.


Thomson Reuters Stock Reports says CTC Media has one of the strongest balance sheets in its industry with net margins of more than 15 percent and a 12 percent return on equity. CTC Media is the perfect blend of growth and income: The company is forecast to grow 34 percent a year for the next five years, its stock rose 67 percent in 2013, and it delivers a 5.1 percent yield.


Tompkins Financial (TMP)

Here's a small-cap regional financial company that reeks of long-term performance. Tompkins Financial Corp. has shown profits, revenue and cash dividends for 59, 56 and 132 years consecutively. The company has increased dividends for 24 straight years. TMP even skated through the financial crisis in 2008 and broke profit records, so no worries here when it comes to lending practices.


With the Fed promising to taper its monthly bond buying, interest rates are expected to rise and give regional banks more flexibility to up dividends…not that Tompkins needs that impetus to do so. TMP currently yields 3.2 percent and provided a comfortable 20 percent profits to investors in 2013. There's no reason 2014 won’t mark the Tomkins' 25th consecutive year of a dividend boost.

 

The 50+ Years Club

Here's a bonus for you: Seven companies that have delivered and raised dividends for more than 50 years.


Try these out for size: Dover Corp. (DOV), Procter & Gamble (PG), Emerson Electric (EMR), Genuine Parts (GPC), 3M (MMM), Cincinnati Financial (CINF), and Coca-Cola (KO).

 

More from Traders Reserve:


 

 

11Comments
Jan 10, 2014 11:33AM
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This article is straight out of an Economics textbook.   The Econ term for it is "inelastic" e.g. 'ya' gotta have it.'   I have been stating this for several years on these blogs only to be reamed by seat-of-the -pants investors.  Instead, the know-it-alls seem hell bent on investment in fly-by-night companies offering babbling one liners on 'social media.'  So be it.  The one with the most money when the music stops wins.
Jan 10, 2014 12:52PM
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Sorry - These stocks are not for me - I'll stick with Large Cap - Iconic - Dividend Stocks !
Jan 10, 2014 11:15AM
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ALL = companies with 'elastic' demand.  ALL = shades of the dot.com bubble burst.  No surprise here.
Jan 13, 2014 2:03PM
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Ummm, what?!

"Unfortunately, greed is as dirty a five-letter word as growth when it comes to dividends."

By my count, growth is a 6-letter word...

Jan 10, 2014 11:50AM
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Always recommend stocks at their multiyear or all time highs.  Hey that's real valuable.
Jan 10, 2014 5:23PM
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TMP did NOT "skate" through the financial crisis. The stock closed at $56.25 on Dec 19, 2008.  On March 6, 2009 it closed at $32.50, representing a loss in value of 42% in less than 3 months!  It closed at $36.31 on December 18, 2009, representing a loss of 35% for the year.
Jan 13, 2014 2:17PM
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To nobody's surprise manipulators took complete control of these markets, right before 1230 hrs they started accelerating so down we went....Triple digits and counting, they are not fooling around today but manipulating things at will....Three long hours to go folks, play defense, crooks are in charge and they will do and undo at will for the rest of the day...All we can do is try to minimize the damage...More after the close.
Jan 10, 2014 1:56PM
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kALLIO........ There was an article about Seadrill (SDRL) a couple days back...


I think it was here, check their archives on the different article sections.

Jan 11, 2014 1:52AM
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Republicans reduce their workforce!
Republicans reduce employee wages!
Republicans outsource jobs!
Republicans eliminate pensions and benefits!
Republicans want to eliminate Social Security, Medicare, Medicaid and Snap!
Republicans want to end Unemployment benefits, thus forcing more people on Welfare, which they want to eliminate!
Republicans want to destroy Unions and enforce "Right to Fire" states.
Republicans want Corporate Fascism and an Oligarchy to rule the land!
Republicans worship money and obscene profits above all else!
Republicans want your vote to make all these things a reality!

Is it any wonder why Republicans are losing and becoming extinct?

Mainstream Americans will not allow Republicans to destroy America!

God bless America!
Jan 10, 2014 2:10PM
avatar
Since it's an election year, we Repukelicans all of sudden, care about the poor.

Could we get your vote please and in return, we promise to take good care of you. In fact, when we are done with you, you will never suffer from pain or worries ever again. WE HAVE A PLAN!

We are also setting up thousands of food trucks from coast to coast, to help feed you and your families through these tough economic times.

So, all you beautiful poor people,.... "Come and get your gruel, we aren't at all that cruel".
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