When the conversation turns to great dividend stocks, much of the attention tends to center around established favorites like PepsiCo, AT&T, and ExxonMobil. There’s nothing inherently wrong with the focus that high-profile favorites receive, and these companies have typically earned their reputations through attractive yields and sustained dividend growth, but narrowing in on the big names can cause investors to overlook other compelling opportunities.
To help put readers on the trail of some underappreciated dividend stocks, we assembled a panel of Motley Fool contributors and asked each to profile a great company that returns significant cash to shareholders and is flying under the radar. Read on to see why they identified…
PetMed Express (NASDAQ:PETS), Greif (NYSE:GEF), and Dover (NYSE:DOV) as income-generating stocks that could play a winning role in your portfolio.
It’s a dog’s (and cat’s) life
Chuck Saletta (PetMed Express): People love their pets — so much so that many are willing to medically treat those pets’ illnesses and infestations like fleas and ticks. PetMed Express operates as an online pharmacy for pets, offering access to those types of treatments to anyone with access to the internet.
With a market capitalization of around $400 million, PetMed Express falls under the radar of many dividend-focused investors who want their income from huge companies. In addition, dividends are not frequently associated with online retailers, which also makes PetMed easy to overlook.
That, however, is a huge part of PetMed Express’ potential appeal for dividend-seeking investors. It currently offers a yield in the neighborhood of 5%, and that substantial payout consumes only around half its trailing earnings. Even better for investors, those earnings are expected to grow at a reasonable clip over the next several years, providing reason to believe it can potentially keep up its trend of fairly regular dividend increases.
Of course, part of the reason the company offers such a substantial yield is that its shares have been under pressure recently, due in part to an increasingly competitive operating environment. While its annual earnings have generally increased on a year-over-year basis, its recent growth rate has slowed, and it hasn’t always delivered up to analysts’ expectations.
Patient investors will recognize that its clean balance sheet and cash-generating operations provide the flexibility it needs to adapt to that ever-changing competitive environment. That flexibility, plus a solid current dividend payment with potential room for further growth, makes it a great candidate as an undiscovered gem among dividend-paying stocks.
What’s in the box? Dividends!
Rich Smith (Greif): When you order a package from Amazon.com, how do you know that it has arrived?
It’s obvious: A cardboard box shows up on your doorstep and it has the company name emblazoned on the side: Amazon. What you may not notice is that, in smaller font, and probably stamped somewhere out of the way on the bottom of the box, another name is visible: the name of the company that made the box that your Amazon purchase arrived in.
Such packaging companies are easy to overlook. They’re largely unknown to investors focusing on popular momentum stocks. And yet, as Greif Inc. demonstrates, they can be amazingly rewarding dividend stocks regardless. Greif, you see, makes…
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