The low interest rate environment has made high dividend yielding stocks the focus for many individual as well as institutional investors. In this article we will discuss 5 stocks which have been chosen because of their attractive dividend yields and ability to keep paying dividends in future. We consider them worthy investments for 2012.
Avon Products, Inc. (NYSE: AVP) manufactures and markets beauty related products. Its shares are currently trading near yearly lows at $17.8 per share, and have traded between $16.09 and $31.60 over the last 52-week period. The company reported a dividend yield of 5.3%. Avon Products generated a return-on-equity of 44% and a profit margin of 6.5%. Both its gross margin and operating margin, 63.5% and 11.2% respectively, were greater than the industry averages. Revlon (REV), a competitor of Avon, showed slightly better margins. Both companies reported a quarterly revenue growth of 5.7%. According to Seeking Alpha, Avon Products has been generating an increasing amount of dividends over a period of 22 years. They also mention that the companyâ€™s shares should be bought at yearly lows, since Avon is currently looking for increases in its share price. As the company seeks a new CEO, it has seen its share of financial troubles and structural changes. Based on this, UBS Investment Research has given Avon a Neutral rating. Despite that, Avon is expected to continue its historical trend of increasing dividends.
Two Harbors Investment Corporation (NYSE: TWO) is a real estate investment trust (REIT). Its shares are currently trading at $9.4 per share. Over the last 52 weeks, its shares have traded between $7.72 and $11.51, indicating relative stability in its share price. The companyâ€™s beta of 0.23 also shows that its stock is not volatile in nature. Two Harbors reported a dividend yield of 17.1%, and generated a profit margin of 70%. Since the companyâ€™s initial public offering in 2009, its dividend rates have been increasing slightly. Also, it reported a gross margin of 100%, and an operating margin of 86.5%, both of which are significantly greater than the industry averages at 58% and 23% respectively. Two Harbors has one of the higher dividend yields amongst its peers. One of the risks in investing in mortgage funds, such as Two Harbors, is an increase in the interest rates, but the Fed has mentioned that interest rates are expected to stay constant until 2013.
FirstEnergy Corporation (NYSE: FE) is an energy company that generates, transmits, and distributes electricity. Its shares are currently trading around $42 per share. Over the last 52 weeks, its shares have traded between $36.11 and $46.51, showing relatively low levels of volatility. The company also has a beta of 0.35, which also indicates that its shares are not volatile. FirstEnergy generated a return-on-equity of 8.34% and a profit margin of 6%. Its dividend yield was reported at 5.2%. FirstEnergy generated a quarterly revenue growth of 27% which was significantly higher than the industry average of 7%. Its gross margin of 54% was also higher than the industry average at 36.5%. Earlier this month, it was reported that there were only 17 stocks in the S&P 500 index with a dividend yield greater than 5%. FirstEnergy is one of them. The high level of dividends paid by the company, combined with a low beta, are indicative of stable returns over long periods of time. This is why some dividend stocks are better than long-term treasury bonds.
Banco Santander, S.A. (NYSE: STD) engages in the provision of banking products. Shares of the company are currently trading at $7.3 per share, and have traded between $6.77 and $12.72 over the last 52-week period. Banco Santander reported a dividend yield of 6.9%. It managed to generate a return-on-equity of 10.7% and a significant profit margin of 22%. Banco Santander also reported an operating margin of 34%, which was greater than the industry average at 28%. Over the last five years, the company has generated an average dividend yield of 7.1%. Also, its growth rate for dividends over the last five years was 13.25%. With a free cash flow of $8 billion, the bank is expected to not only meet its capital requirements, but also to continue paying out dividends.
SanofiÂ (NYSE: SNY) is a company that discovers, develops, and distributes therapeutic solutions. Its shares are currently trading at $35.8 per share. Over the last 52 weeks, its shares have traded between $30.98 and $40.75 per share, indicative of relatively low levels of volatility. It has a beta of 1.01, indicating that the stock is not very volatile in nature. Sanofi reported a dividend yield of 3.7% and a profit margin of 14.5%. Both its operating margin of 21% and gross margin of 69% are greater than the industry averages at 12% and 50% respectively. Its earnings per share of $2.25 are also greater than the industry average. Sanofi is expected to outperform the 10-year Treasuries due to its valuations. Currently, Sanofi is trying to cut its costs due to an expiry of some of its patents.