As a value investor, I often screen for quality stocks to buy for the long run. I am quite interested in a business that is growing and has a history of paying consistent dividends over time. The dividend yield needs to be decent, and more intriguingly, the CEOs have to be getting bullish on their own stocks. Thus, to search for those opportunities, I set up a screen with 5 main criteria: (1) the market cap is more than $1 billion, (2) minimum 10 years of paying dividends, (3) dividend yield should be at least 1%, (4) 10 year annualized EPS growth should be at least 4%, and (5) within the last 2 months, the CEO bought the company’s stock. Here are the top 3 results.
The Procter & Gamble Company (NYSE: PG) is one of the global leaders in the fast moving consumer industry, operating in more than 180 countries, with two main global business units: Beauty and Grooming, and Household Care. In the last 3 years, the biggest customer of the company has been Wal-Mart, accounting for 14%-16% of the total sales. P&G is known for paying consistent and growing dividends. In the last 10 years, the dividend has grown from $0.82 per share in 2003 to $2.14 in 2012. The current dividend yield is 3.2%. In the same period, P&G has experienced a 7% annualized growth in its earnings per share, from $1.85 to $3.66. Currently, P&G is trading at $70.22 per share, with the total market capitalization of $192.33 billion.
In October, its current Chairman and CEO, Robert McDonald, has indirectly purchased 5,564 shares in the open market at an average price of $70.14 per share, with the total transaction value of more than $390,000. Bill Ackman, an activist hedge fund manager, has acknowledged the value of P&G by putting more than 21% of his total $8.9 billion portfolio into the company as of September this year. He mentioned that P&G has been trading at a historically low multiple on depressed earnings. Currently, P&G is valued at 15.7x forward earnings.
Raymond James Financial (NYSE: RJF) is the financial holding company with more than 225 locations in the US, providing diverse financial services to clients, including asset management, capital markets, securities lending, etc. In the last 3 years, the majority of its revenue has come from Private Client Group, accounting for more than 63.5% of the total group revenue. The company has paid out consistent and increasing dividends in the last 10 years. The current dividend yield is 1.4%. Its EPS has grown from $0.78 in 2003 to $2.20 in 2012, marking an annualized growth of more than 10.9%.
In December, the CEO of Raymond James Bank purchased 165 shares at $32.13 per share, with the total transaction value of only $5,300. Jeffery Trocin, the company’s CFO, has purchased the similar small positions. However, looking deeper, several insiders have exercised their options at lower prices and simultaneously sold them in the open market. Raymond James is trading at $37.51 per share, with the total market capitalization of $5.17 billion. It is valued at 11.1x forward earnings.
UGI Corporation (NYSE: UGI), incorporated in 1991, is the distributor of propane and butane, natural gas and electric services, and other energy related services, with the majority of its income coming from the Gas Utility segment, accounting for more than 40% of its net income. In the last 10 years, UGI has increased its EPS from $1.15 to $1.76 per share, creating an annualized growth of 4.4%. Along with it, its dividend has grown from $0.57 in 2003 to $1.06 per share. The current dividend yield is 3.3%. Recently, Robert Beard, the CEO of UGI Utilities, has bought 500 shares at around $33.11 per share, with the total transaction value of only $16,555. However, like Raymond James, several insiders have been exercising their options at a lower price then selling it for the market price.
Foolish Bottom Line
The screen is just to help investors narrow down the investment opportunities. We need to dig deeper to find a suitable stocks for our own portfolios. Personally, I think the CEO buys of Raymond James and UGI seem to be symbolic only, with very low value. Among the three, income investors might consider P&G, with a global strong footprint, to hold for the long run.