In this article, I will examine five stocks that I believe will provide a strong dividend income as well as capital appreciation. The five stocks discussed in this article all have dividend yields in excess of 4%. I chose these five stocks because they are all capitalizing on positive drivers such as innovative new drugs, highly diversified product offerings and effective management. Below, I will discuss why these stocks could continue trending higher and be excellent long-term investments.
FNB Corporation (NYSE:FNB) The company reported fourth quarter revenues of $129.5 million compared to revenues of $122.3 million in the fourth quarter of 2010. Fourth quarter net income was $87 million compared to net income of $74 million in the fourth quarter of 2010. FNB is a financial holding company which serves small and midsized businesses in Pennsylvania and Northeastern Ohio. In the fourth quarter FNB increased year-over-year revenues by 6% and net income by 17%. The company's fourth quarter earnings slowed, and where roughly equal to its third quarter earnings. One big reason that earnings slowed was because in the fourth quarter the company lost $17.3 million in revenues as a result of the new debit card fee regulations. The company cut its dividend by 50% from $0.96 in the first quarter of 2009, but since the announcement the stock price has increased by 57%. The stock is up by 15% over the last 52 weeks. Investors have gravitated towards this company because it has a safe income flow and pays a $0.48 dividend with a 4.1% yield. In the short term FNB's valuations (price to earnings ratio 17.13 and price to book ratio 1.25) are high for a slow-growth financial company. As a long-term investment FNB will provide steady profits, and a secure dividend.
Bristol-Meyers Squibb Company (NYSE:BMY) Bristol-Meyers has a market cap of $54.21 billion with a price to earnings ratio of 14.88. The company reported fourth quarter revenues of $5.4 billion compared to revenues of $5.1 billion in the fourth quarter of 2010. Fourth quarter net income was $852 million compared to net income of $483 million in the fourth quarter of 2010. One of Bristol-Meyers competitors is AstraZeneca Plc (AZN). AstraZeneca is currently trading around $48 with a market cap of $61.55 billion and a price to earnings ratio of 6.53. AstraZeneca pays a dividend which yields 8.3% versus Bristol-Meyers whose dividend yields 4.3%. In the fourth quarter, the company increased year-over-year revenues by 5.8% and net income by 76%. In the fourth quarter conference call, the company's CEO Lamberto Andreotti talked about promising advances in a number of new drugs most notably ELIQUIS which is for stroke patients, and YERVOY which is for cancer patients and recently began distribution in the U.S. Bristol-Meyers in its search to increase revenues just completed a cash tender offer for 77.5 million shares of Inhibitex (INHX) at $26 per share.
In additional good news Bristol-Meyers along with Sanofi (SNY) just received a settlement payment of $442 million Apotex as a result of its Plavix patent infringement case. Over the last five years, the company has increased its dividend four times by 21% and it currently pays a dividend of $1.36 with a 4.3% yield. Bristol-Meyers, which is in an upward trend, has seen its stock price increase by 25% over the last 52 weeks.
Aircastle Limited (NYSE:AYR) The company reported third quarter revenues of $141 million compared to revenues of $132 million in the third quarter of 2010. Third quarter net income was $22 million compared to net income of $8.5 million in the third quarter of 2010. In the third quarter, the company increased year-over-year revenues by 6.8% and its net income by 158%. The company's primary source of revenues comes from airplane leases. The company had a strong third quarter in which its leasing business recorded a 99% utilization rate. The company expects to benefit from tight European credit markets, which makes it more attractive for European airline companies to lease airlines than to buy them. The company has paid dividends for 22 straight quarters and increased its dividend by 12% to $0.60 per share in the third quarter of 2011. The company's stock has performed well and is up by 13% over the last 52 weeks and 331% over the last three years. Aircastle, which offers a strong dividend flow for a reasonable (price to earnings ratio 9.65/price to book ratio 0.73) price, could see its stock move higher.
Reynolds American (NYSE:RAI) Reynolds has a market cap of $23.46 billion with a price to earnings ratio of 16.83. The company reported fourth quarter revenues of $2.08 billion compared to revenues of $2.08 billion in the fourth quarter of 2010. Fourth quarter net income was $304 million compared to net income of $262 million in the fourth quarter of 2010. Reynolds manufactures and distributes cigarettes and tobacco products. In the fourth quarter, the company's year-over-year revenues were flat but its net income increased by 16%. Reynolds was able to increase it net income because of improved net operating margins. In the fourth quarter, its net operating margin increased 3%. Even though the company is unlikely to see large earnings increases the stock has performed extremely well. The stock is up by 20% over the last 52 weeks and 162% over the last three years. The reason that the stock has performed well is because the company has steady income from an addicted clientele, and it pays a large and growing dividend. The company has paid quarterly dividends since 1999, and it has increased the dividend five times by 17.9% over the last five years. The current dividend is $5.20 per share with a yield of 5.6%. Reynolds is an attractive stock to investors that want the potential for capital appreciation along with a highly competitive dividend.
Merck & Company (NYSE:MRK) In the fourth quarter, the company grew year-over-year revenues by $300 million and net income by $2.04 billion. Merck has been profitable in each of the last ten years, and in 2011 it increased its revenues by $2 billion and its net income by $5.41 billion. The company has a drug pipeline that includes five new drugs that had double digit sales increases in Europe and Canada during the fourth quarter. One of Merck's new products Januvia is the largest oral anti-diabetic medication in the world. The company's management showed that it is confident about future earnings when it increased its fourth quarter dividend by 10.5% to $1.68 per share. Investors have showed confidence in Merck and have bid up the stock price by 16% over the last 52 weeks and 52% over the last three years. Merck will provide investors with steady profits, and a strong dividend. The company reported fourth quarter revenues of $12.3 billion compared to revenues of $12 billion in the fourth quarter of 2010. Fourth quarter net income was $1.5 billion compared to net income of $-531 million in the fourth quarter of 2010.
- High Yield Dividend Stocks in Gurus' Portfolio
- Top dividend stocks of Warren Buffett
- Top dividend stocks of George Soros
About the author:
I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.