Publicly traded companies that pay out dividends are often viewed as more stable than their non-dividend-paying counterparts. In addition, dividend paying companies can be quite attractive to both individuals who seek a stream of income, and/or to funds with a mandate to garner income for their investors. (To learn more about this lucrative distribution, be sure to read The Importance Of Dividends.)
With that in mind, I set out on my weekly mission to uncover companies that have a forward annual dividend yield in excess of 5%.
|Company||Market Cap.||Forward Annual Div. Yield|
|Cooper Tire & Rubber Co.
|Dow Chemical Co.
|Eastman Chemical Co.
|Data as of market close January 28, 2009|
The Leader of the Pack
Let's take a look at what I think is the most promising pick from this group: Eastman Chemical. This company makes, as its name suggests, chemicals. However, it is unlikely that you would be familiar with many of its products. According to the company's website, its products "are used in making everything from the packaging for your food, drinks and personal care products, to the fabric in your clothing and home furnishings, to the paint on your house and automobile, to the plastics on your bicycle helmet and golf clubs."
In other words, its wares have become an integral part of our society.
Despite the prevalence of their products, however, things haven't been going all that well for the company as of late. The economic slowdown has stymied demand, and the shares, like those of many other companies these days, are trading in the lower end of their 52-week trading range.
Last week, the Tennessee-based company released its fourth quarter results. It earned 5 cents from continuing ops, excluding items. The Street had been looking for it to earn 35 cents. I think its chief executive, Brian Ferguson, said it best in the release, when he said: "The current global recession has resulted in an unprecedented decline in demand and has negatively impacted our fourth-quarter results."
Some Promise in the Mix
However, I don't think that Eastman should be written off just yet. Frankly, over the long term I can't help but think that the company's wares will be in strong demand. After all, we are a nation of consumers and its products are a part of many items that we enjoy.
As far as dividends are concerned, in December its board declared a 44 cent dividend. Also, the forward annual dividend yield is 6.1%. Of course dividends are not guaranteed, but this rate should provide investors with some solace nonetheless.
At present, the company is expected to earn $3.13 a share in 2009. I think there is a chance that estimate could get ratcheted downward in the days ahead, but even if the company were to earn just $2.50 a share in 2009, that's pretty attractive given that the shares trade at under $26. (Is your dividend safe? We go over several telling factors that can help you answer this question and avoid losses in Is Your Dividend At Risk?)
Dividends are not guaranteed, but they can be a good potential source of income for investors. Eastman Chemical is suffering losses as a result of the financial downturn just like just about every other company out there. However, I see this as a strong company with the potential to survive and thrive into the future. Dividends just provide some added incentive for investors who want to hang on for the ride ahead.