When investors think of dividend stocks, oftentimes our minds go straight to the gold standard of dividend payers: the Dividend Aristocrats, which are S&P 500 stocks that have not only paid but grown their dividends for 25 years or more.
While many of the Dividend Aristocrats still hold up for income investors, others have failed to raise their dividends at a pace that is anywhere near their business growth, resulting in incredibly low yields. For example, while Sherwin-Williams Co. (SHW, Financial) has grown its dividend for more than 25 years, its dividend yield is just 0.97%, making it one of 23 Dividend Aristocrats yielding less than 2% as of this writing.
Thus, using the All-in-One Screener, a Premium feature of GuruFocus, I decided to expand my search for loyal and high-yielding dividend stocks to include the rest of the U.S. market. Based on this screen, three stocks that stood out to me for having good yields, decent growth and attractive valuations were UGI Corp. (UGI, Financial), Universal Health Realty Income Trust (UHT, Financial) and Leggett & Platt Inc. (LEG, Financial). You can find the full screen here.
UGI
UGI (UGI, Financial), a natural gas distributor and electric utility, has a dividend yield of 3.72% and has increased its dividend payments for 34 years. The three-year dividend growth rate is a solid 7.2%.
With a three-year revenue per share growth rate of 5% and a three-year Ebitda per share growth rate of 19.2%, the company is growing and improving its profitability. In terms of valuation, the company has a price-earnings ratio of 7.62, which is below both the industry and its own historical median, a PEG ratio of 0.87 and a GF Value chart showing modest undervaluation.
Due to its exposure to the natural gas industry, which is currently undergoing a period of high volatility, as well as its subsidiaries that operate in the European market, the near-term outlook for UGI may be uncertain, which is likely a big part of the reason why the stock price has fallen.
However, the dividend looks very safe due to the payout ratio of 0.28. Moreover, UGI is making significant investments in renewable energy such as renewable natural gas and bioLPG, so it should have more long-term relevance than non-renewable peers.
Universal Health Realty Income Trust
A health care real estate investment trust, Universal Health Realty Income Trust (UHT, Financial) sports a dividend yield of 5.49% and 35 years of dividend growth, though the three-year dividend growth rate is lacking at 1.5%.
Universal Health Realty’s three-year revenue per share growth rate is on the low side at 3.2%, and while funds from operation peaked in 2014 and have been on the decline since then, this metric has still doubled since 2010. With a price-to-funds from operation ratio of 14.82% and a share price that’s less than half of all-time highs reached in February 2020, the GF Value chart rates the stock as modestly undervalued.
One thing to keep in mind with Universal Health Realty is that it’s a small-cap stock, with a market cap of just $710.54 million. That’s why a vacancy at one of its properties has had a noticeable effect on funds from operation. The big problem in health care right now is that due to the pandemic, many health care workers either died from Covid or were burnt out from the field, causing understaffing and resulting in surging labor costs.
But one important distinction is that Universal Health Realty is a landlord, not a health care operator, so it is not as negatively affected by health care industry troubles as it may seem on paper. With the company’s slow but steady growth, its dividend looks reliable and has a better track record than most REITs.
Leggett & Platt
Leggett & Platt (LEG, Financial), a maker of bedding, furniture and engineered flooring products, has a dividend yield of 4.95%, 50 years of dividend growth and a three-year dividend growth rate of 3.4%. Those 50 years of dividend growth earn the stock a place among the Dividend Kings.
Leggett & Platt has a three-year revenue per share growth rate of 5% and a three-year earnings per share without non-recurring items growth rate of 9.2%.While the PEG ratio is worryingly high at 3.42, meaning the stock may be overvalued compared to its growth, the price-earnings ratio of 13.34 is below the company’s historical median, and the GF Value chart rates the stock as modestly undervalued.
With a payout ratio of 0.65, investors may be worried about the sustainability of Leggett & Platt’s dividend as the housing market cools down, threatening the company’s bedding, furniture and flooring businesses. However, it held strong even through the Great Recession, and while its balance sheet is weaker nowadays, this Dividend King’s commitment to shareholder returns means a dividend cut seems unlikely.
In addition to its main businesses (approximately 48% of revenue comes from the bedding segment and 18% from flooring), Leggett & Platt also has automotive (16% of revenue) and aerospace (2%) segments, which provide diversification. The company is also expected to benefit from its focus on domestic manufacturing, a rarity which will help it as the U.S. government attempts to de-globalize supply chains.
