High Yield Dividend Stocks Among Most Predictable Companies
Shaw Communications Inc. Cl B (SJR)
Dividend Yield: 4.2%
Shaw Communications Inc. is a diversified communications and media company that provides broadband cable television, High-Speed Internet, Home Phone, telecommunications services (through Shaw Business), satellite direct-to-home services (through Shaw Direct) and television programs (through Shaw Media). The company has over 2.3 million basic customers, making it the largest cable company in Canada. Including satellite, it has over 3.2 million Canadian customers.
GuruFocus has ranked Shaw Communications the business predictability rank of 5 stars due to its predictable revenue and earnings. Shaw has a 10-year EBITDA growth rate of 20.5%, 5-year growth rate of 15.7%, market cap of %9.2 billion and P/E ratio of 14.2. It has returned over $2.1 billion to shareholders in dividends and share buybacks since 2005.
Shaw communications has a strong position in the Canadian communications market. As of August 31, 2010, it had an internet penetration rate of almost 80%, and its digital rental penetration has grown from 40% at its launch in October 2009 to 70% as of August 31, 2010.
The company’s revenue for fiscal 2010 was $3.7 billion, and it expects that number to rise to approximately C$5 billion after it integrates new acquisition Canwest.
Shaw’s next big business move will be to scrap its $1 billion wireless business build plan and instead provide, in partnership with Cisco (CSCO), a cheaper managed Wi-Fi network, it announced on September 1. It also nixed plans to launch its own sports channel.
The company’s primarily challenge is loss of video customers due to intense competition within the Canadian telecom market. Together, Telus Corporation (TU), Rogers Communications Inc. (RCI) and BCE Inc. (BCE) have 90% of the Canadian cable and media market share.
Alliance Resource Partners L.P. (ARLP)
Dividend yield: 5.1%
Alliance Resource Partners L.P. (ARLP) is a diversified coal producer and marketer with mines and facilities in the Illinois Basin, Central Appalachia and Northern Appalachia. The company was the coal-producing industry's first publicly-traded master limited partnership.
GuruFocus rates Alliance Resource Partners a business predictability rating of 5 stars based on its predictable revenue and earnings. Alliance has a 14.9% 10-year EBITDA growth rate, 14.5% five-year EBITDA growth rate, $2.7 billion market cap and P/E ratio of 9.7. It also has the fifth largest dividend yield in the coal industry and has increased dividends for seven consecutive years.
The coal industry has been rebounding since the market sunk in 2008-2009. “The post-recession demand recovery helped improve the group’s earnings power, with most coal companies solidly profitable in 2010. This uptrend in demand, largely driven by the improvement in the global economic activity, rebound in domestic power demand, favorable weather patterns and soaring coal demand from Asian countries, also continued into 2011,” Zacks reports. June Coal exports were at their highest levels since 1992, rising 49% during the first quarter of 2011 compared to the same quarter a year ago, teaching 26.6 million share tons, according to the EIA.
Correspondingly, Alliance Resource Partners had record financial results in the quarter ended June 30, 2011. Revenues reached a record $457.9 million due to record sales volumes and record prices. The company plans to begin constructing a new site, the Gibson South mining complex, which will produce up to 3.3 million tons of coal annually and should producing by the third quarter of 2014. Capital expenditures for the mine are expected to be between $200 - $210 million, and the company plans to fund it with cash on hand and cash from operations.
Strayer Education Inc. (STRA)
Dividend yield: 4.3%
Strayer Education Inc. (STRA) is an education services holding company that owns Strayer University, which provides higher education for working adults on campus, online or through a combination of both.
GuruFocus gives Strayer Education Inc. a business predictability rating of 4.5 stars based on predictable revenue and earnings. The company has a 14.7% 10-year EBITDA growth rate, 26.5% 5-year EBITDA growth rate, $1.1 billion market cap, and 9.3 P/E. Its dividend has increased for three consecutive year since 2008, and would be five years except for a special $2 per share dividend in 2007. On October 26, 2010, Strayer’s board of directors authorized increasing the annual dividend to $4.00 per share from $3.00 per share.
Heavier government regulations on the for-profit education industry have negatively impacted profits. Last quarter, Strayer Education saw a 21% drop in new student enrollments, lower than competitor Apollo Group (APOL), which saw a 40.5% drop. Strayer’s new student enrollments decreased 5%.
Nevertheless, revenues for the second quarter increased 3% to $163.8 million due to level enrollment and a tuition increase imposed in January 2011. The company also plans to open three new campuses for the fall academic term – two in Chicago, Ill., a new market, and a third in Dallas, Texas – for a total of eight campus openings in 2011.
Grupo Aeroportuario del Sureste S.A. de C.V. ADS S (ASR)
Dividend yield: 4.6%
Aeropuertos del Sureste (ASUR) owns Mexico’s Leading Airports, operating nine airports in the southeast of Mexico, which serve between 15 to 17 million passengers per year. For the second year in a row, its Cancun airport ranked best in Latin America and Caribbean, possibly helped by the approximately $643 million the company invested in upgrades for its airports from 1999-2010.
GuruFocus gives ASUR a business predictability rating of 4.5 stars. ASUR has a 10-year EBITDA growth rate of 12.7%, five-year EBITDA growth rate of 11.8%, market cap of $1.5 billion and P/E ratio of 15.
In the last 21 years, ASUR’s passenger traffic has growth at a CAGR of 5.6%. Seventy-five percent of its passengers fly to its main airport in Cancun, which is the largest in Latin America in terms of international passengers. Through August of this year, passenger traffic increased 1.8% compared to the same period last year.
The company’s revenues increased 3.37% to $2.2 billion pesos for the first half of 2011 compared to the first half of 2010. Free cash flow for the second quarter of 2011 was $36.3 million, down from $52 million the second quarter 2010.
Telefonica S.A. ADS (TEF)
Dividend yield: 8%
Telefonica is the largest supplier of telecommunications services in the Spanish and Portuguese speaking world, and the largest telecoms operator in the euro zone.
GuruFocus gives Telefonica S.A. a business predictability rating of 4.5 stars. It has a 25.5% 10-year EBITDA growth rate, a 19.8% 5-year EBITDA growth rate, $89.5 billion market cap and a P/E ratio of 3.6. The company has raised its dividend for seven consecutive years. Paying the dividend, among other things, caused the company to go €826 million deeper into debt in the first half of 2011 from year-end 2010.
Telefonica is facing fierce competition from other telecom companies. Its share of the mobile market decreased marginally to 41.46% in February 2011 from 41.58% in January 2011, while it lost 42,623 customers. In April its market share shrank further, to 41.34%. The company is also operating in Spain, a severely depressed market where one in five people are unemployed.
Revenues for the first half of 2011 increased 6.3% year on year, with Latinoamerica the key growth driver, accounting for 46% of the total. A 2.2% year-on-year sales increase together with Latinoamerica growth helped offset a 6.1% decrease for Telefonica Espana. Strong performance in Brazil helped secure its leadership in a market that it believes will become its primary source of revenue.
GuruFocus’ High Yield Dividend Stocks Among Predictable Companies list is here.