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Four Stocks with Minimum 10% ROE for Five Years and Dividend Yield of at Least 12%

February 07, 2012 | About:
Investors normally love stocks which have a record of both long-term profitability and high dividend yield. These stocks best suit long-term and income investors. In order to choose the stocks that fit the above criteria, I set the screening parameters with three main following points: 1) profitable for the last five years, 2) at least 10% return on equity for the last five years, and 3) current dividend yield at least 12%. Here are the four candidates:

Portugal Telecom SA (PT)

PT is a Portugal-based telecommunications operator. It is engaged in rendering a range of telecoms and multimedia services in Portugal and other countries such as Brazil and Africa, including fixed, mobile, and multimedia, data and corporate solutions.

The company has extremely high return on equity, which increased rapidly in the last years, ranging from more than 40% to nearly 200%. Currently, PT's share price is $5.3, with the total market capitalization of $4.7 billion. In 2011, the company paid out a $1.13 dividend per share. At the current share price, the dividend yield of PT reaches 21.3%. In terms of multiple valuations, the market is valuing PT at 10.1x P/E, 1.2x book value and 2.8x its cash flow.

Life Partners Holdings (LPHI)

LPHI is the financial services company in the secondary market for life insurance which is known as life settlements. LPHI facilitates the sale of life settlements between sellers and purchasers, but it does not take control of the policies. It facilitated more than 130,000 purchaser transactions involving over 6,400 policies. This company demonstrated consistently high return on equity over the last five years, in the range of 44.5%-123%. At the time of this writing, LPHI’s market capitalization is $90 million, and its share price is $4.83. In 2011, the company paid out 60 cents in dividends, making the current dividend yield being 12.4%. Currently, LPHI is valued at 120x earnings, 2.2x its book value and 28.4 its operating cash flow.

Shipment Finance International (SFL)

The business is engaged in the ownership and operation of vessels and offshore related assets. It is also involved in the charter, purchasing and sale of assets. The company’s branches are located in different areas such as Bermuda, Cyprus, Liberia, Norway, the U.S., Singapore, the UK and Marshall Islands.

In terms of profitability, the return on equity has been quite consistent over the last five years, ranging from 21% to 32%. At the current price of $12.11 per share, the market capitalization of SFL is $958.2 million. Last year, $1.55 was paid out as dividend per share, making the dividend yield as high as 12.8%. At this time, SFL can be considered cheaply valued in the market, with a P/E of 7.3x, P/B of 1.1 and P/CF of 6.6x.

Great Northern Iron Ore (GNI)

GNI is the trust which owns rights to around 12,000 acres of mineral and non-mineral lands on Mesabi Range in Northeastern Minnesota. It also leases land to major mining corporations such as National Steel, LTV Steel Mining and Hibbing Taconite. In return, those companies pay royalties to GNI based on tonnage of ore mined. Over the last five years, GNI’s return on equity has been triple-digit figures, ranging from 103% to 165%. In 2011, GNI paid out $15 in dividend per share. With the current market price of $123.83, the dividend yield is 12.1%. Currently, GNI is valued in the market at 8.7x earnings, 15x its book value and 8.8x its operating cash flow. If any investors would like to buy in this stock, they should remember that GNI will cease to be a going concern and all shares would be cancelled in the beginning of April 2015.

About the author:

Anh Hoang
Money manager into global equities, especially with US and Vietnam markets. CFA level 3 candidate. Lecturer for Stalla - CFA course in Vietnam

Visit Anh Hoang's Website


Rating: 3.4/5 (18 votes)

Comments

HARDNOKGRAD
HARDNOKGRAD - 2 years ago
As readers should ALWAYS do due diligence beforehand, let me pass some along re: PT. For non-EU residents, Portugal has a 25% Dividend withholding tax (See their Investor Page) which is better to know about beforehand, than find out on your statement. Yes this is recoverable on your 1040, EXCEPT if you are trading non-taxably in an IRA, etc. I found this out the hard way for NOK. (Finland is 15%) Good Trading!

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