High Dividend Yield Stocks

When Boring is Beautiful

Not only are banks not paying you for your deposits anymore (OK, maybe a few pennies here and there); but many of them are now forced to charge you for basic services that have been “free” for years thanks to Dodd/Frank (which severely limited what bank’s ability to charge merchants that took debit/credit cards). Now that “swipe fees” have been crushed…so has free checking. So, where does one go to earn money on savings now? If you have some time to wait, we have a few great options to consider.

Investment Profile: Huntsman (HUN)

Huntsman (HUN) is a specialty chemicals company that makes products for adhesives, aerospace, automotive, construction products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals, and dye industries. We sure do love boring at Magnum Opus Financial. This boring company (because it makes all sorts of products that you’ve never noticed before) sports a 6.62 Forward P/E and quarterly revenue growth of 25%.

HUN pulls in over 10 Billion in cash annually and has the juicy 3.2% dividend covered 7 times over (the dividend is $0.40 and the company has $2.85 in cash on their balance sheet). HUN used to trade for over $20 and is now selling for $12.51 (closing price on Friday, November 4th). While the 52-week low is $8.13, the stock is $4 off the lows, but $9 from the highs. The risk reward (including the dividend payments) is favorable here with much more room to go up than down. Before you buy though, don’t forget to go back and listen to the conference call for the most recent quarter (which was released on November 2nd).

Investment Profile: Ducommun Inc. (DCO)

Ducommun Inc. (DCO) has been around since 1849 doing all sorts of things most people never think about like: aluminum hot-forming, machining, metal bonding, and chemical milling services. DCO also makes illuminated push button switches and panels, microwave switches, and fractional horsepower motors. DCO also sports a measly 5.55 Forward P/E and a 2.2% dividend. DCO has $2.98/share in cash to pay the $0.30 dividend (which is covered nearly 10 times over).

It will not take much time to learn how the company is doing these days with earnings being reported after the close on Monday (November the 7th). This is a great chance to check out the company before you put your hard earned dollars into the stock. DCO is only $0.50 away from it’s 52-week low…but $13 away from it’s 52-week high. Any sort of good news on Monday and this stock should head back towards the highs for the year. You can make a play on the quarter during the trading day on Monday or wait until after the quarter to decide (that’ll depend on your risk tolerance).

Investment Profile: Perkin Elmer (PKI)

Perkin Elmer (PKI) serves two markets: Human Health and Environmental Health. The Human Health segment provides diagnostics, tools, and applications to help detect diseases and accelerate the discovery and development of therapies (think genetic screening, x-rays, etc). The Environmental Health segment provides technology that helps create safer food and consumer products and help companies use energy resources efficiently. We know what you are thinking right…boring. You are correct. Perkin Elmer is another company that has been operating outside of the American consciousness for nearly 80 years (founded in 1931).

Like our other picks, PKI trades with a single digit P/E of 6.43 with a dividend of 1.4%. PKI has $3.50/share in cash in order to pay that $0.28 dividend (which is covered by more than 10 times). PKI may have the smallest dividend; but it’s the only 1 of the 3 stocks with large free cash flow ($240 Million). PKI is $2 away from the lows and $9 away from the year’s highs. After the quarter reported last week on November 3rd, the stock fell 5% on Friday. Since the damage has now been done, and the quarter is in (for you to review) earnings risk has been removed until next quarter. The CEO for Perkin Elmer talked about the company’s success in expanding margins and adding promising new products to the pipeline via acquisition. He highlighted the demographic trends benefitting the company as more people are tested earlier in life for both genetic diseases, as well as infectious diseases. The entire conference call is available for your review on the company’s website (or you can read the transcript from Seeking Alpha).

Get Paid to Wait for your Big Gains to Happen

While we like the market position and financial position of each of the companies above, it’s easy to get additional info since we are hot & heavy into earnings season. The data is fresh and the investors who read & digest the conference calls first have the advantage over others who make uniformed decisions by simply following the crowd. So, while parking your money in stocks does mean that your principal is at risk, each of these companies is off the radar of most investors and provides a dividend for you to sit around collecting while you wait for the fundamental story of the company to play out…taking the stocks higher. If you’re lucky, you’ll collect the dividend for a few quarters and get some free shares before the stock takes off. If not…then it’s a high quality problem to have.