You're watching...
MFS Value Fund Co-Manager Kate Mead on the criteria to consider when investors are looking for dividend-paying stocks for their portfolio.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Really people treasuries I mean what if I told you the 264.
Companies on the S&P.
Pay dividends that are higher than the yield on the ten year treasury and there are some names that Kate need.
Who call manages the MFS values -- believes will be the next big dividend players.
She's joining us from Boston to show how she identifies those companies and she's gonna name a few hi Kate thanks for being here -- and that's kind of a stunning statistic and here's another one for Britain's six S&P 500 companies pay dividends of that is the highest level since 1999.
What is up that suddenly these companies found religion of their paying money back to their shareholder.
We certainly think -- a great thing for a long term oriented masters.
And I -- thank act company managements are saying that it can't create a substantial amount of value.
Particularly when you can compound those dividends over time and -- nice present them you know US.
Criteria list of how to identify the next big dividend players so get to some of them we can put all -- -- you can talk about sort of the number one that.
Criterion that matters when it comes to trying to identify.
The next stop that will really pay out well but also performed decently right I -- we want that to.
Yeah absolutely so I think there's a couple of different things that you want to look for in terms have.
Not only who could be the next big dividends player but you can only sustain as dividends over time because that's certainly.
An important -- criteria that you want to look for.
I think the number one thing to look at is a free cash flow that the business has -- -- can actually cover the dividend over time to they have enough left over to return it to you.
I'd also look at the balance sheet that make sure that panic -- financial position.
I'll looking at the characteristics of the business in terms of how sustainable and durable is that -- -- so.
You know you don't wanna invest -- -- Sort of -- declining player in an industry that may have to cut its dividend down a red brain and I think management behavior.
It's also important -- have a management team that's actually willing to return cash flow that they have.
To you -- -- -- -- data that okay now of because we we make this balance and give us the four criteria that you look at that that should be red flags that that should put up a warning and I find as we show these to you about highly leveraged balance sheets some of them are obvious.
But I like this one funding the dividend by taking on debts.
Have you seen up a lot lately and because that would be certainly worrisome.
Not supposed to do -- yeah you know well I think it depends on the company so there's certainly companies.
-- that you know have a great balance sheet that are able to access to capital markets that historically low rates.
And that's not necessarily a bad thing in -- back can be a pretty good paying.
Where you be worried as if they can't actually find their dividends through the cash flows daughter of the business they already have a lot of financial leverage and it's really compromising.
The financial health -- that this mass.
By Kate levering up.
-- -- -- -- -- -- -- -- but he we would name the ones that you have identified as the next big thing so as we cycle through these and I'm gonna name them me EU pick out one that got Manhattan and Philip -- seems obvious that got a nice dividend -- you feel that this will be an increase that's a three point 8% dividend.
There's Lockheed Martin.
Four point 3%.
Five -- three point 8% extent shirt 2% IBM one point 6% -- your belief is that they will hike the dividend we will see dividend growth here on these names.
Yet I think if you look at the characteristic somebody's company's -- generate a substantial amount of cash flow.
They've done a great shot at returning that cash to shareholders they all have.
Pretty good track records of -- dividends and the double digit range for the last number of years and I think there's good reason to think that.
That can continue.
Centrist and IBM June July would've been the time to -- climbing back up to its year high think UK very much for teaching us some really important investment as we always try to do that here on Fox Business we don't just -- sound like some other business networks that.
You know everybody understands how to do this so we appreciate your former on this Kate made his co manager start -- -- -- -- -- value fund thanks so much to --
