3 Dividend Growing Investors

Published Sun, 29 May 2016 14:15 CET by DividendYields.org

The dividend yield is often a good indication of how much cash flow investors are getting for every dollar they invest in an equity position. The milestone of 3% is considered a high dividend yield. If you require a minimum stream of income for your investment, you can kind of secure your cash flow by investing in stocks that pay high and relatively stable dividend yields.
This article discusses three small-cap and mid-cap independent investment companies that trade on the NYSE and the Nasdaq Composite Index. All three companies currently trade close to their 52 week high. Their average dividend yield is 5.66%, way above the milestone of 3%, and their average payout ratio is 85%. Given that the industry average payout ratio is above 130%, the average payout ratio of these companies is good. Average dividend per share is $1.32. Finally, the average beta of 1.43 and the average debt-to-equity ratio of 0.41 indicate that all three companies do not rely on creditors so much to finance their business.

Ares Capital, Evercore Partners and Moelis & Company YoY Stock Performance Graph
Ares Capital (Nasdaq: ARCC) is a New-York based business development company that provides consultation in the acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of companies with an EBITDA between $10 million and $250 million. Ares Capital works mainly with companies engaged in the basic and growth manufacturing, business services, consumer products, healthcare products, and information technology sectors, but it also considers investments in the restaurant, retail, and oil and gas industry.

Q1 2016 Financial Results
Revenues declined 1.3% YoY to $248.1 million from $253.3 million, generating a gross profit margin of 54%, up 4.1% YoY from 51.9% in Q1 2015. Total operating expenses declined 1.3% YoY to $130.1 million from $131.9 million, yet operating income declined as well, 2.8% YoY to $117.9 million from $121.4 million. Net income grew 30.8% YoY to $131.5 million from $100.6 million. Operating cash flow for 2015 grew to $360.4 million from $658.6 million losses in 2014, a 154.7% YoY increase. Further than these strong financial results, Ares Capital has a low debt-to-equity ratio of 0.77, which indicates that the company relies more on its equity than on debt financing.

Dividend Strength
On June 13, 2016, Ares Capital declared a quarterly dividend of $0.38, thus reaching an annualized dividend of $1.52 per share. The dividend yield is 10.14%, making the stock quite attractive, whereas the payout ratio is 117%, slightly lower than the Investment Services Industry payout ratio of 130.5%. Moreover, for the period 2005-2016, the dividend growth is 26.7% or 2.4% annually. This suggests a company that sustainable returns shareholder value. During the first quarter of 2016, the company repurchased about 393,000 shares at an average price of $13.94 and a total cost of $5.5 million and it focuses on capitalizing on active share repurchases in the coming quarters. To that end, Ares Capital has recently extended the term of its $100 million stock repurchase program from September 2016 to February 2017.

Future Outlook
In the coming quarters, Ares Capital is expected to capitalize on the forthcoming market correction deriving from the easing investor concerns. The company will remain focused on seeking selective transactions with a strong relative value that could deliver long-term growth and return shareholder value in the near-term. Analysts estimate an average EPS of $1.60, up 23.1% from current EPS of $1.30, which will bring the payout ratio down to 95%.

Evercore Partners (NYSE: EVR) is a New York-headquartered investment banking advisory firm that provides its services to the United States, Europe, Latin America, and internationally. Through its Investment Banking and Investment Management segments, Evercore Partners offers advisory services on mergers, acquisitions, divestitures, leveraged buyouts, and other strategic corporate transactions as well as services related to securities underwriting, and private fund placement. The company also manages financial assets for institutional investors and provides wealth management services to high-net-worth individuals.

Strong Q1 2016 Results
Evercore’s first quarter 2016 results signify a strong start for the year. Revenues grew 7.4% YoY to $260.4 million from $242.4 million, generating a gross profit margin of 99.0%, up 0.8% YoY from 98.2% in the same period last year. Total operating expenses grew 5.6% YoY to $244.3 million from $231.4 million. Operating income reached $16.1 million, up 46.5% YoY from $11.0 million and net income reached $5.3 million from $4.3 million, a 23.7% increase. Operating cash flow for 2015 reached $356.9 million from $216 million, a 65.2% YoY increase. Evercore capitalized on the robust restructuring activity in the energy and commodity sectors to offset challenges from broader market volatility.

Dividend Strength & Outlook
In the first quarter, Evercore returned $123.1 million to its shareholders in the form of dividends and repurchases. On May 25, 2016, the company declared a quarterly dividend of $0.31, thereby reaching an annualized dividend of $1.24, which yields 2.42% at a payout ratio of 125.3%. From 2008 to 2016, the dividend growth is 158.3% or 19.8% annually, suggesting a dividend grower stock with a potential to outperform the market. Evercore is the only stock to have outperformed its peers and the NYSE Composite Index YoY, as shown in the graph above. Through 2018, analysts estimate an average EPS of $2.01, up 102.7% from current EPS of $0.99, which will bring the payout ratio down to 62%.

Name Price ($) 52 wk low 52 wk high 52 wk low % 52 wk high % Market Cap ($ b) P/E D/E Beta Payout Ratio
Ares Capital 14.89 11.01 16.80 35.24% -11.37% 4.70 11.54 0.77 0.78 117%
Evercore Partners 51.60 41.57 60.63 24.13% -14.89% 2.03 51.83 0.45 1.66 125%
Moelis & Company 26.94 22.91 31.84 17.59% -15.39% 1.43 16.96 0 1.85 75%

Moelis & Company (NYSE: MC) is a New-York based investment company that provides strategic and financial advisory services both in the United States and Australia, Asia, Europe and Latin America. Moelis & Co. advises clients regarding mergers and acquisitions, recapitalizations and restructurings, as well as related corporate finance matters and serves public multinational corporations, governments, financial sponsors, middle market private companies, and individual entrepreneurs.

Strong Q1 2016 Results
Despite market volatility in the first two months of 2016, Moelis & Co managed to successfully complete its M&As. Average fee per transaction increased and the company has participated in a recurring restructuring activity that has led to a higher level of retainers. These factors have produced revenues that climbed to $126.4 million, up 27.1% YoY from $99.4 million in Q1 2015. Total operating expenses grew 24.9% YoY to $97.5 million from $78.0 million due to a 28.4% YoY increase in the Selling, General and Administrative Expenses. Operating income grew 35.1% reaching $28.9 million from $21.4 million and net income grew 30.5% to $7.0 million from $5.3 million, a 30.5% YoY increase.

Dividend Strength & Outlook
On May 18, 2016, Moelis & Co declared a quarterly dividend of $0.3, thereby reaching an annualized dividend of $1.20. This yields 4.43% at a payout ratio of 75.0%. The company’s dividend growth since 2014 is 50%, or 25% annually, suggesting that the company is a strong dividend grower. For the next three years, analysts estimate an average EPS of $1.82, up 13.5% from current EPS of $ 1.60. What is impressive about Moellis is that, although it is a small cap with a market cap of $1.43 billion, it can deliver strong dividends and can be competitive.


Stock name Dividend Yield
Ares Capital 9.02
Moelis & Company 3.35
Evercore Partners 1.95

Articles featuring Ares Capital (ARCC):

Prospect Capital's Detailed Dividend And NAV Sustainability Analysis - Part 1 (Includes Remaining Fiscal Year 2019 Monthly Dividend Projection)

Author's Note: This two-part article is a very detailed analysis of Prospect Capital Corp.'s (PSEC) dividend and net asset value ("NAV") sustainability. I have continued to cover this "in-depth" topic due to the number of readers who have specifically requested such an analysis be performed on PSEC at periodic intervals. There was an even greater number of requests for this specific analysis this quarter due to PSEC's recent earnings report. For readers who just... Read more

Approaching Oversold Conditions, Driving 9% Yield With Upcoming Specials

CGBD Special Dividend Coming in December 2018 TCG BDC Inc. (CGBD) continues to have excellent dividend coverage for many reasons including increased overall portfolio yield and continued ramp of its joint venture Middle Market Credit Fund, LLC (“Credit Fund”). There will likely be another special dividend paid in Q4 as the company pays out excess net investment income ("NII") in the form of supplemental/special dividends as shown in the following chart and was discussed on... Read more

Main Street Capital's NAV, Dividend, And Valuation Compared To 14 BDC Peers (Post Q2 2018 Earnings) - Part 2

Author’s Note: PART 1 of this article analyzed Main Street Capital Corp.’s (MAIN) recent quarterly results and compared several of the company’s metrics to twelve other business development company (“BDC”) peers. PART 1 helps lead to a better understanding of the topics and analysis that will be discussed in PART 2. The link to PART 1’s analysis is provided below: Comparing Main Street Capital's NAV, Dividend, And Valuation To 12 BDC Peers (Post Q2... Read more

33 'Safer' Dividend Financial WallStars Fetch 3.6-12.6% Yields For September

Actionable Conclusions (1-10): Analysts Estimated Top Ten "Safer" Financials WallStars To Net 18.15% to 42% Gains By September 2019 Five of ten top "safer" dividend Financials (tinted gray in the chart above) were verified as being among the top ten by yield for the coming year as well as for gains based on analyst 1-year target prices. Thus the yield strategy for this group as graded by analyst estimates proved 50% accurate. Projections based on estimated dividend... Read more

Prospect Capital's NAV, Valuation, And Dividend Compared To 14 BDC Peers (Post Q2 2018 Earnings)

Author's Note: I am writing this "supplemental" article due to multiple requests that such an analysis be specifically performed on Prospect Capital Corp. (PSEC) in light of recent quarterly results. The format of this article will be similar to a Main Street Capital Corp.'s (MAIN) article I provided which compared that company's results to twelve business development company ("BDC") peers. Within that article, data regarding PSEC's calendar second quarter of... Read more