Deep Dive: 21 dividend stocks yielding 5% or more of companies that will produce plenty of cash in 2023

by | Oct 4, 2022 | Stock Market

When the stock market has jumped two days in a row, as it has now, it is easy to become complacent. But the Federal Reserve isn’t finished raising interest rates, and recession talk abounds. Stock investors aren’t out of the woods yet. That can make dividend stocks attractive if the yields are high and the companies produce more cash flow than they need to cover the payouts.

Below is a list of 21 stocks drawn from the S&P Composite 1500 Index
that appear to fit the bill. The S&P Composite 1500 is made up of the S&P 500
the S&P 400 Mid Cap Index
and the S&P Small Cap 600 Index
The purpose of the list is to provide a starting point for further research. These stocks may be appropriate for you if you are looking for income, but you should do your own assessment to form your own opinion about a company’s ability to remain competitive over the next decade.Cash flow is key One way to measure a company’s ability to pay dividends is to look at its free cash flow yield. Free cash flow is remaining cash flow after planned capital expenditures. This money can be used to pay for dividends, buy back shares (which can raise earnings and cash flow per share), or fund acquisitions, organic expansion or for other corporate purposes. If we divide a company’s estimated annual free cash flow per share by its current share price, we have its estimated free cash flow yield. If we compare the free cash flow yield to the current dividend yield, we may see “headroom” for cash to be deployed in ways that can benefit shareholders. For this screen, we began with the S&P Composite 1500, then narrowed the list as follows:
Dividend yield of at least 5.00%.

Consensus free cash flow estimate available for calendar 2023, among at least five analysts polled by FactSet. We used calendar-year estimates, even though fiscal years for many companies don’t match the calendar.

Estimated 2023 free cash flow yield of at least double the current dividend yield.

For real-estate investment trusts, dividend-paying ability is measured by funds from operations (FFO), a non-GAAP figure that adds depreciation and amortization back to earnings. Adjusted funds from operations ( …

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