Marking the 12th consecutive month of declines, inflation rose only 3% in June according to the consumer price index. This was below economists’ expectations of a 3.1% increase.
As the producer price index data is due to be released later this month, uncertainty remains regarding the Federal Reserve’s direction on interest rates. Due to these circumstances, many investors are looking for some stability within their portfolios.
One strategy they can use to hedge their investments against inflation and other headwinds is to look for stocks that pay dividends while prices are down. While there is always a risk of the dividend being cut, historically, dividend-paying companies have been found to be less erratic in choppy market conditions and continue to provide a better overall return compared to stocks that do not distribute dividends to investors.
According to GuruFocus’ Historical High Dividend Yield Screener, a Premium feature, there are a number of companies that have long and consistent histories of paying dividends. In addition, they currently have a dividend yield of over 4% and a dividend payout ratio below 0.5.
As of July 12, companies that qualified for the screener and were held by at least five gurus based on first-quarter 13F filings included Coterra Energy Inc. (CTRA, Financial), The Western Union Co. (WU, Financial), MDU Resources Group Inc. (MDU, Financial), Independent Bank Corp. (INDB, Financial) and Horizon Bancorp (HBNC, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Coterra Energy
Offering a 7.90% dividend yield and a payout ratio of 0.39, Coterra Energy (CTRA, Financial) is held by 11 gurus. The company has not reduced its dividend in 26 years.
The Houston-based oil and gas production company has a $20.04 billion market cap; its shares were trading around $26.46 on Wednesday with a price-earnings ratio of 5.07, a price-book ratio of 1.58 and a price-sales ratio of 2.30.
The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 92 out of 100, the GF Score indicates the company has high outperformance potential. While it received solid ratings for profitability, growth, financial strength and value, the momentum rank is more moderate.
Of the gurus invested in Coterra Energy, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest position with 0.81% of its outstanding shares. The stock is also being held by Diamond Hill Capital (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Paul Tudor Jones (Trades, Portfolio), Michael Burry (Trades, Portfolio) and a number of other gurus.
Western Union
Sporting a 7.90% dividend yield and a payout ratio of 0.47, Western Union (WU, Financial) is held by eight gurus. The company has not cut its distribution in 17 years.
The financial services company headquartered in Denver, which provides money transfer services both domestically and internationally, has a market cap of $4.47 billion; its shares were trading around $11.95 on Wednesday with a price-earnings ratio of 5.98, a price-book ratio of 8.07 and a price-sales ratio of 1.05.
According to the GF Value Line, the stock, while undervalued, is a possible value trap. As a result, potential investors should do thorough research before making a decision.
The GF Score of 75 implies the company is likely to have average performance going forward on the back of high profitability and value ratings and more moderate ranks for growth, financial strength and momentum.
With a 0.50% stake, Simons’ firm is Western Union’s largest guru shareholder. Other notable guru investors include Mark Hillman (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), John Rogers (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Mario Cibelli (Trades, Portfolio) and Steven Cohen (Trades, Portfolio).
MDU Resources Group
With a dividend yield of 4.14% and a payout ratio of 0.48, six gurus have positions in MDU Resources Group (MDU, Financial). The company has not reduced its payment in 41 years.
The Bismarck, North Dakota-based company, which provides energy delivery and construction services, has a $4.36 billion market cap; its shares were trading around $21.43 on Wednesday with a price-earnings ratio of 11.65, a price-book ratio of 1.22 and a price-sales ratio of 0.60.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The GF Score of 85 means the company has good outperformance potential, driven by high ratings for profitability, growth and momentum as well as more moderate financial strength and value ranks.
Barrow, Hanley, Mewhinney & Strauss is MDU Resources’ largest guru shareholder with a 1.62% stake. Richard Pzena (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), Keeley-Teton Advisors, LLC (Trades, Portfolio), Simons’ firm and several other gurus also have positions in the stock.
Independent Bank
Generating a 4.48% dividend yield and a payout ratio of 0.36, five gurus own Independent Bank (INDB, Financial). The company has not slashed its dividend in 29 years.
The bank holding company, which is headquartered in Michigan, has a market cap of $2.12 billion; its shares were trading around $48.06 on Wednesday with a price-earnings ratio of 8.09, a price-book ratio of 0.75 and a price-sales ratio of 2.95.
The GF Value Line suggests the stock is significantly undervalued currently.
Supported by high ratings for growth and value and a more moderate profitability rank, the GF Score of 71 indicates the company is likely to have average performance going forward. Its grades for financial strength and momentum are low, however.
Holding 0.59% of its outstanding shares, Simons’ firm is Independent Bank’s largest guru shareholder. Ken Fisher (Trades, Portfolio), Jones, Keeley-Teton and Joel Greenblatt (Trades, Portfolio) also own the stock.
Horizon Bancorp
Yielding 6.01% and with a 0.32 payout ratio, Horizon Bancorp (HBNC, Financial) is held by five gurus. For the past 28 years, the company has not cut its dividend.
The Michigan City, Indiana-based bank has a $469.39 million market cap; its shares were trading around $10.64 on Wednesday with a price-earnings ratio of 5.27, a price-book ratio of 0.67 and a price-sales ratio of 1.98.
According to the GF Value Line, the stock, while undervalued, is a possible value trap currently. As such, potential investors should approach with caution.
With a GF Score of 62, the company has poor future performance potential. Although it received a high value rank, profitability and growth ratings are more moderate and the financial strength and momentum grades are low.
Hotchkis & Wiley is Horizon Bancorp’s largest guru shareholder with 0.87% of its outstanding shares. Simons’ firm, Jones, Caxton Associates (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also have positions in the stock.
