This is the time of the year when Wall Street prognosticators do their best to entertain investors with predictions.
But after two excellent years for U.S. stocks, maybe it’s time to position yourself to enjoy high and well-supported dividends if the market turns sour in 2022.
Many companies have rebounded this year from low sales during the pandemic doldrums of 2020, or in the case of banks, enjoyed a massive bump to earnings as they released loan-loss reserves. So the following dividend-stock screen looks forward, using consensus estimates for 2022.
Read: ‘Proceed with caution’: Here’s what Wall Street analysts see for the U.S. stock market in 2022
If you look at the headline link above — maybe investors should always proceed with caution. Despite good economic news — the latest being the lowest number of weekly unemployment claims since 1969 — stock-market performance in 2022 could be tamped-down by another coronavirus variant or high inflation, if it turns out to be a longer-term phenomenon.
The benefit of dividend stocks is obvious to investors who need current income, but it may also be soothing for any investor to be paid to wait if the market is weak for a while.
High-yielding dividend stocks with ‘headroom’
A stock with a high dividend yield has its attractions, but you probably want some comfort that the dividend won’t be cut — that means excess cash flow beyond what it is already paying out.
One way to measure dividend-paying ability is to look at a company’s free cash flow yield. Free cash flow is remaining cash flow after planned capital expenditures. This money can be used to pay 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 annual free cash flow per share by its current share price, we have its 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 the following screen, we began with the S&P 1500 Composite Index XX:SP1500, which is made up of the S&P 500 SPX, the S&P 400 Mid Cap Index MID and the S&P Small Cap 600 Index SML.
Here are the criteria for the screen:
- Dividend yield of at least 3.00%, which is more than twice the current yield on 10-year U.S. Treasury notes BX:TMUBMUSD10Y.
- “Headroom,” based on consensus estimates for free cash flow per share for calendar 2022, among analysts polled by FactSet. These estimates are not available for most companies in the financial sector, so the screen for that group was done using earnings-per-share estimates. For real estate investment trusts, the headroom screen is based on consensus 2022 estimates for funds from operations (FFO) per share, which is a non-GAAP calculation commonly used in the REIT industry to measure dividend-paying ability.
- Majority “buy” or equivalent ratings among analysts polled by FactSet, with a minimum of five analysts covering each company.
Of course, companies for which the appropriate estimate for 2022 wasn’t available were excluded from the screen.
Dividend-stock screen results
The following 17 companies among the S&P Composite 1500 made the cut, excluding financials and REITs, which are listed separately below:
| Company | Ticker | Estimated 2022 FCF yield | Dividend yield | Estimated “headroom” for 2022 | Estimated FCF per share – 2022 | Closing price – Dec. 8 | Share “buy” ratings |
| Devon Energy Corp. | DVN | 15.26% | 4.39% | 10.88% | $ 6.86 | $ 44.91 | 85% |
| Bristol-Myers Squibb Co. | BMY | 13.66% | 3.40% | 10.26% | $ 7.87 | $ 57.60 | 64% |
| LyondellBasell Industries N.V. | LYB | 15.25% | 4.99% | 10.25% | $ 13.80 | $ 90.50 | 52% |
| NRG Energy Inc. | NRG | 13.47% | 3.35% | 10.12% | $ 5.23 | $ 38.81 | 58% |
| Chemours Co. | CC | 11.15% | 3.11% | 8.04% | $ 3.59 | $ 32.15 | 57% |
| EOG Resources Inc. | EOG | 11.10% | 3.33% | 7.77% | $ 10.00 | $ 90.08 | 80% |
| Phillips 66 | PSX | 12.56% | 5.12% | 7.44% | $ 9.03 | $ 71.85 | 79% |
| Marathon Petroleum Corp. | MPC | 11.01% | 3.62% | 7.38% | $ 7.05 | $ 64.06 | 84% |
| Valero Energy Corp. | VLO | 12.80% | 5.54% | 7.26% | $ 9.06 | $ 70.72 | 81% |
| Kontoor Brands Inc. | KTB | 8.97% | 3.40% | 5.57% | $ 4.86 | $ 54.19 | 75% |
| Chevron Corp. | CVX | 9.53% | 4.53% | 5.01% | $ 11.29 | $ 118.45 | 68% |
| Merck & Co. Inc. | MRK | 8.21% | 3.77% | 4.44% | $ 6.01 | $ 73.21 | 67% |
| Hanesbrands Inc. | HBI | 7.32% | 3.40% | 3.91% | $ 1.29 | $ 17.63 | 57% |
| Williams Companies Inc. | WMB | 9.00% | 5.93% | 3.07% | $ 2.49 | $ 27.64 | 72% |
| DT Midstream Inc. | DTM | 6.84% | 5.05% | 1.79% | $ 3.25 | $ 47.49 | 78% |
| Coca-Cola Co. | KO | 4.05% | 3.05% | 1.00% | $ 2.23 | $ 55.00 | 61% |
| Newmont Corp. | NEM | 4.76% | 3.90% | 0.86% | $ 2.68 | $ 56.36 | 57% |
| Source: FactSet | |||||||
The list is sorted by estimated “headroom,” and includes the FCF estimate and the closing prices on Dec. 8, on which the FCF yields are based. There is great variance in estimated “headroom” for these companies.
Any stock screen has its limitations. If you are interested in stockslisted here, it is best to do your own research, and it is easy to get started by clicking the tickers in the table for more information about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote page.
Financials
Companies in the financial sector were excluded from the list above, because FCF estimates aren’t available for most of them. So here is an earnings-per-share dividend “headroom” screen, with 10 companies making the cut:
| Company | Ticker | Estimated 2022 EPS yield | Dividend yield | Estimated “headroom” for 2022 | Estimated EPS – 2022 | Closing price – Dec. 8 | Share “buy” ratings |
| Citigroup Inc. | C | 12.75% | 3.27% | 9.48% | $ 7.96 | $ 62.46 | 62% |
| MetLife Inc. | MET | 11.79% | 3.17% | 8.62% | $ 7.15 | $ 60.62 | 81% |
| Valley National Bancorp | VLY | 8.49% | 3.12% | 5.37% | $ 1.20 | $ 14.12 | 63% |
| Citizens Financial Group Inc. | CFG | 8.36% | 3.28% | 5.08% | $ 3.98 | $ 47.60 | 80% |
| First Horizon Corp. | FHN | 8.64% | 3.58% | 5.05% | $ 1.45 | $ 16.75 | 80% |
| F.N.B. Corporation | FNB | 8.96% | 3.98% | 4.99% | $ 1.08 | $ 12.07 | 80% |
| New York Community Bancorp Inc. | NYCB | 10.33% | 5.52% | 4.80% | $ 1.27 | $ 12.31 | 57% |
| James River Group Holdings Ltd. | JRVR | 9.02% | 4.51% | 4.50% | $ 2.40 | $ 26.58 | 75% |
| Pacific Premier Bancorp Inc. | PPBI | 7.75% | 3.35% | 4.40% | $ 3.05 | $ 39.38 | 57% |
| Ellington Financial Inc. | EFC | 11.36% | 10.24% | 1.12% | $ 2.00 | $ 17.57 | 75% |
| Source: FactSet | |||||||
REITs
For REITs, we screened for FFO yields and “headroom,” as explained above. Here are the 23 REITs in the S&P Composite 1500 that made the cut:
| Company | Ticker | Estimated 2022 FFO yield | Dividend yield | Estimated “headroom” for 2022 | Estimated FFO – 2022 | Closing price – Dec. 8 | Share “buy” ratings |
| Corporate Office Properties Trust | OFC | 8.42% | 3.94% | 4.48% | $ 2.35 | $ 27.92 | 85% |
| Hudson Pacific Properties Inc. | HPP | 8.08% | 3.82% | 4.27% | $ 2.12 | $ 26.19 | 54% |
| Highwoods Properties Inc. | HIW | 8.65% | 4.50% | 4.15% | $ 3.84 | $ 44.44 | 56% |
| Kite Realty Group Trust | KRG | 7.35% | 3.30% | 4.05% | $ 1.60 | $ 21.83 | 73% |
| RPT Realty | RPT | 7.54% | 3.51% | 4.04% | $ 1.03 | $ 13.68 | 56% |
| Cousins Properties Inc. | CUZ | 6.98% | 3.12% | 3.86% | $ 2.78 | $ 39.79 | 67% |
| Medical Properties Trust Inc. | MPW | 8.58% | 5.04% | 3.54% | $ 1.91 | $ 22.23 | 85% |
| Sabra Health Care REIT Inc. | SBRA | 11.98% | 8.70% | 3.28% | $ 1.65 | $ 13.79 | 64% |
| Simon Property Group Inc. | SPG | 7.42% | 4.19% | 3.22% | $ 11.68 | $ 157.45 | 52% |
| Urban Edge Properties | UE | 6.33% | 3.22% | 3.11% | $ 1.18 | $ 18.63 | 60% |
| Armada Hoffler Properties Inc. | AHH | 7.24% | 4.51% | 2.73% | $ 1.09 | $ 15.09 | 71% |
| CareTrust REIT Inc. | CTRE | 7.09% | 4.68% | 2.41% | $ 1.61 | $ 22.65 | 89% |
| National Retail Properties Inc. | NNN | 6.37% | 4.55% | 1.82% | $ 2.97 | $ 46.56 | 57% |
| Essential Properties Realty Trust Inc. | EPRT | 5.41% | 3.62% | 1.79% | $ 1.55 | $ 28.72 | 83% |
| Community Healthcare Trust Inc. | CHCT | 5.39% | 3.80% | 1.58% | $ 2.44 | $ 45.34 | 63% |
| Healthpeak Properties Inc. | PEAK | 5.04% | 3.48% | 1.56% | $ 1.74 | $ 34.53 | 58% |
| Agree Realty Corp. | ADC | 5.38% | 3.82% | 1.56% | $ 3.84 | $ 71.34 | 85% |
| Easterly Government Properties Inc. | DEA | 6.14% | 4.81% | 1.34% | $ 1.35 | $ 22.06 | 83% |
| Realty Income Corporation | O | 5.60% | 4.29% | 1.31% | $ 3.85 | $ 68.85 | 57% |
| Four Corners Property Trust Inc. | FCPT | 5.69% | 4.60% | 1.09% | $ 1.64 | $ 28.90 | 71% |
| Iron Mountain Inc. | IRM | 6.16% | 5.16% | 1.00% | $ 2.95 | $ 47.91 | 75% |
| American Campus Communities Inc. | ACC | 4.38% | 3.40% | 0.97% | $ 2.42 | $ 55.23 | 70% |
| Crown Castle International Corp. | CCI | 3.84% | 3.07% | 0.77% | $ 7.35 | $ 191.55 | 57% |
| Source: FactSet | |||||||
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