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High yield securities are thought of primarily as income generators. But less attention is paid to their ability to compound income over time.There are three drivers for compounding income from any investment:
Reinvesting dividends is especially powerful with high-yield securities. Higher yields mean that you can compound your income stream faster by reinvesting dividends.If all dividends from a 5.0% yielding stock are reinvested, you will compound your income stream at approximately 5.0% annually.And since high yield stocks, on average, don’t have particularly high growth rates, you can “create” income growth by reinvesting dividends until you need them for personal finance reasons.There are many high yield securities out there. But it’s non as common for a high-yield security to pay rising dividends on a per share basis over time.When this happens, your income compounds, even when you don’t reinvest dividends.But if you do reinvest dividends, you get compounding benefits from both owning more shares (through reinvesting dividends), and receiving more income from each share (from dividend growth on a per share basis).Therefore, finding stocks with a high current yield with dividend increases, can be a powerful combination.The following 10 high yield dividend compounders have current yields above 5%, and Dividend Risk Scores of ‘C’ or better. The list also excludes REITs, BDCs, and MLPs.
High Yield Dividend Compounder #10: Evergy Inc. (EVRG)
Evergy is an electric utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri.Through its subsidiaries Evergy Kansas, Evergy Metro and Evergy Missouri West, the company serves approximately 1.4 million residential customers, nearly 200,000 commercial customers and 6,900 industrial customers and municipalities in Kansas and Missouri.In early November, Evergy reported (11/7/24) financial results for the third quarter of fiscal 2024. The company benefited from rate hikes and higher weather-normalized demand, partly offset by cooler summer weather and higher depreciation.
Source: Investor PresentationAdjusted earnings-per-share grew 7% year-over-year. Evergy reaffirmed its positive guidance for 2024. It expects adjusted earnings-per-share of $3.73-$3.93 and reiterated its long-term guidance for 4%-6% adjusted earnings-per-share growth.It also expects earnings-per-share of $3.92-$4.12 in 2025.Click here to download our most recent Sure Analysis report on Evergy Inc. (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #9: Spire Inc. (SR)
Spire Inc. is a public utility holding company based in St. Louis, Missouri. The company provides natural gas service through its regulated core utility operations while engaging in non-regulated activities that provide business opportunities.The company has five gas utilities, serving 1.7 million homes and businesses across Alabama, Mississippi, and Missouri. This makes Spire the 5th largest publicly traded natural gas company in the country.
Source: Investor PresentationThe company generated $2.6 billion in sales in Fiscal Year (FY)2024. Spire has been growing its dividends for 22 straight years.On November 20th., 2024, the company reported its FY2024 fourth quarter results. The company reported a net income of $250.9 million ($4.19 per share), up from $217.5 million ($3.85 per share) in fiscal 2023.Adjusted earnings reached $247.4 million ($4.13 per share), improving from $228.1 million ($4.05 per share) the previous year.The company reaffirmed its long-term adjusted earnings growth target of 5–7% and provided fiscal 2025 earnings guidance of $4.40 to $4.60 per share.Click here to download our most recent Sure Analysis report on SR (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #8: Flowers Foods, Inc. (FLO)
Flowers Foods opened its first bakery in 1919 and has since become one of the largest producers of packaged bakery foods in the United States, operating 46 bakeries in 18 states.Its well-known brands include Wonder Bread, Home Pride, Nature’s Own, Dave’s Killer Bread, Tastykake and Canyon Bakehouse.The company operates in two segments: Direct Store-Delivery (DSD) and Warehouse Delivery, with ~85% of the company’s product being delivered directly to stores.
Source: Investor PresentationFresh breads, buns, rolls, and tortillas make up about a three-fourths of the business, with sales channels for the company split between Supermarkets, Mass Merchandisers, Foodservice, and Convenience Store.On May 23rd, 2024, Flower Foods increased its quarterly dividend 4.3% to $0.24, extending the company’s dividend growth streak to 22 consecutive years.On November 8th, 2024, Flowers Foods reported third quarter results for the period ending October 5th, 2024. For the quarter, revenue of $1.19 billion was down 0.8% from the prior year. Adjusted earnings-per-share equaled $0.33, up from $0.29 in the same quarter last year.Flowers Foods provided an updated outlook for 2024 as well. For the year, revenue is expected in a range of $5.116 billion to $5.147 billion. Adjusted earnings-per-share are expected to be in a range of $1.24 to $1.28.Click here to download our most recent Sure Analysis report on FLO (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #7: RGC Resources, Inc. (RGCO)
RGC Resources, Inc. operates as a distributor and seller of natural gas to industrial, commercial, and residential customers through its subsidiaries: Roanoke Gas, Midstream, and Diversified Energy.Residential customers are the company’s largest customer segment, accounting for ~58% of the total revenues, followed by commercial customers at 34%.The company operates in three segments: Gas Utility, the key revenue generator; Investment in Affiliates; and Parent & Other. The company was founded in 1883 and generates just under $100 million in annual revenue.On November 14th, 2024, RGC Resources announced its Q4 2024 results. The company posted non-GAAP EPS of $0.01, beating the market’s estimate by $0.02, and total revenues of $13.10 million, which were up 5.11% year over year.The earnings growth was driven by higher contributions from the Mountain Valley Pipeline (MVP), primarily from Allowance for Funds Used During Construction (AFUDC) before the pipeline commenced operations in June 2024.Click here to download our most recent Sure Analysis report on RGCO (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #6: CVS Health Corp. (CVS)
CVS Health Corporation is an integrated healthcare services provider that operates a pharmaceutical services business, along with the country’s largest chain of pharmacies.The company operates more than 9,900 retail locations, 1,100 medical clinics, and services more than 102 million plan members. CVS Health Corporation generates annual revenues of about $369 billion.On November 6th, 2024, CVS Health Corporation reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue grew 6.3% to $95.4 billion, which was $2.74 billion ahead of estimates. Adjusted earnings-per-share of $1.09 compared very unfavorably to $2.21 in the prior year and was $0.37 less than expected.Included in results were premium deficiency reserves of ~$1.1 billion due the expectation for losses in the fourth quarter in the Health Care Benefits segment.This was a $0.63 per share headwind to results. Restructuring charges of $1.2 billion also impacted results. Revenues for Health Care Benefits were up 25.5%, while total memberships grew 5.4% to 27.1 million.Click here to download our most recent Sure Analysis report on CVS (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #5: Eversource Energy (ES)
Eversource Energy is a diversified holding company with subsidiaries that provide regulated electric, gas, and water distribution service in the Northeast U.S.The company’s utilities serve more than 4 million customers after acquiring NStar’s Massachusetts utilities in 2012, Aquarion in 2017, and Columbia Gas in 2020.Eversource has delivered steady growth to shareholders for many years.
Source: Investor PresentationOn November 4th, 2024, Eversource Energy released its third-quarter 2024 results for the period ending September 30th, 2024.For the quarter, the company reported a net loss of $(118.1) million, a sharp decline from earnings of $339.7 million in the same quarter of last year, which reflects the impact of the company’s exit from offshore wind investments.The company reported a loss per share of $(0.33), compared with earnings-per-share of $0.97 in the prior year. Earnings from the Electric Transmission segment increased to $174.9 million, up from $160.3 million in the prior year, primarily due to a higher level of investment in Eversource’s electric transmission system.Click here to download our most recent Sure Analysis report on ES (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #4: Portland General Electric (POR)
Portland General Electric is an electric utility based in Portland, Oregon, providing electricity to more than 930,000 customers in 51 cities. The company owns or contracts more than 3.5 gigawatts of energy generation, between gas,coal, wind & solar, and hydro.On April 19th, 2024, Portland General Electric announced a 5% increase in the quarterly dividend to $0.50 per share.Portland General reported third quarter 2024 results on October 25th, 2024. The company reported net income of $94 million for the quarter, equal to $0.90 per diluted share on a GAAP basis, compared to $0.46 in Q3 2023.Retail energy deliveries rose 0.3% year-to-date compared to the same prior year period, but wholesale energy deliveries soared 45%. As a result, total energy deliveries rose 11%.Leadership narrowed its 2024 full year guidance for adjusted earnings per share to $3.13 at the midpoint based on a series of assumptions, most notably a 2.5% increase in annual energy deliveries.Click here to download our most recent Sure Analysis report on Portland General Electric Company (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #3: Interpublic Group of Cos. (IPG)
The Interpublic Group of Companies, Inc. provides advertising and marketing services worldwide. Its operations are well arrayed among consumer advertising, digital marketing, communications planning, media buying, and data management services.On October 22nd, 2024, Interpublic reported its Q3 results for the period ending September 30th, 2024. For the period, net revenues came in at $2.24 billion, down 2.9% compared to last year.This was derived from a negative 0.5% currency translation effect and a negative impact of 2.4% from dispositions, offset by organic growth of 1.0%.The company saw solid contributions to growth from media services, sports marketing, data management and public relations.Adjusted EPS was $0.70, flat compared to last year. Year-to-date, the company repurchased $230.1 million worth of stock, which slightly aided EPS.Click here to download our most recent Sure Analysis report on IPG (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #2: FMC Corp. (FMC)
FMC Corporation is an agricultural sciences company that provides crop protection, plant health, and professional pest and turf management products. Through acquisitions, FMC is now one of the five largest patented crop chemical companies.The company markets its products through its own sales organization and through alliance partners, independent distributors, and sales representatives. It operates in North America, Latin America, Europe, the Middle East, Africa, and Asia.On October 29th, 2024, FMC Corporation released its third quarter results for the period ending September 30th, 2024.For the quarter, the company reported revenue of $1.07 billion, up 9% versus the third quarter of 2023, and adjusted earnings per diluted share of $0.69, up 57% versus the same quarter of the previous year.Quarterly revenue growth was primarily driven by a 17% increase in volume, particularly strong in North America and Latin America, despite facing a 5% decline from price decreases due to challenging market conditions and a 3% foreign exchange headwind.Click here to download our most recent Sure Analysis report on FMC (preview of page 1 of 3 shown below):
High Yield Dividend Compounder #1: HA Sustainable Infrastructure Capital (HASI)
Hannon Armstrong is a U.S. public company that invests in climate change solutions, providing capital to leading companies in energy efficiency, renewable energy, and other sustainable infrastructure markets.The company’s portfolio of assets is worth around $13.1 billion and is split between three market segments: Its Behind the Meter business (46% of assets) focuses on the installation of solar power, electric storage, and other heat and power systems.The Grid-Connected segment (30% of assets) involves investments in grid-connected renewable energy projects, such as solar and off/on-shore wind projects, whose generated yield the company then sells on the wholesale energy markets.Finally, occupying the rest of its portfolio (24% of assets), are the company’s Fuels, Transport, & Nature projects, enabling the use of natural resources, such as its projects to slow pollution runoff across the Chesapeake Bay region.
Source: Investor PresentationOn November 7th, 2024, Hannon Armstrong reported its Q3 results for the period ending September 30th, 2024. For the quarter, total revenues fell by 8.5% year-over-year to about $82 million.The drop in revenues was mainly due to lower rental income due to asset sales as well as lower gains on assets sold compared to last year.Adjusted EPS fell by 16% to $0.52 compared to the prior-year period. The drop was mainly due to lower revenues, offset partially by growth in adjusted net investment income due to a larger portfolio.The company’s pipeline remained robust, including $5.5 billion of asset opportunities. Management affirmed its prior outlook, expecting to deliver adjusted EPS CAGR between 8% and 10% through 2026.Click here to download our most recent Sure Analysis report on HASI (preview of page 1 of 3 shown below):
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