Investing

Deutsche Bank Issues List of Sustainable Dividend Stocks to Buy

In an effort to find the top dividend stocks for our readers, we were intrigued by a Deutsche Bank A.G. (NYSE: DB) research piece that detailed its use of a screening method for dividend stocks known as CROCI, or cash return on invested capital. The computers screen stocks for real economic cash return on the company’s adjusted asset base, calculated as an internal rate of return over the company’s estimated asset life. This in turn helps to determine which stocks make its Sustainable Dividend Screen. We then screened the list by sector, looking for the stocks with the highest return on equity (ROE). Here is the list of stocks to buy from Deutsche Bank.

Mattel Inc. (NASDAQ: MAT) is the ROE leader in the consumer discretionary sector. Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict Mattel’s revenues will expand 5.6% and earnings per share will increase 14.3%. Last quarter, Mattel chalked up revenue of $995.6 million. GAAP reported sales were 7.2% higher than the prior-year quarter’s $928.4 million. The Thomson/First Call estimate for the iconic American toymaker is $49. Investors are paid a 3.09% dividend. While it makes the dividend screen, Deutsche Bank equity analysts do not cover the stock.

Altria Group Inc. (NYSE: MO) continues to be the worldwide sales leader in cigarettes with its popular Marlboro brand, and it is the ROE leader in the consumer staples sector. The company is tackling the shrinking smoking base by moving into electronic cigarettes, or e-cigarettes, which some expect to become a big market. It is also a market that can be advertised to, as such ads are not prohibited. Again, though the stock makes the dividend screen, it is not covered by Deutsche Bank equity team. The consensus price target for the stock is $37. Investors are paid a solid 4.8% dividend.

Baxter International Inc. (NYSE: BAX) is the ROE leader in the health care sector. The company develops, manufactures and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma and other chronic and acute medical conditions. The company operates in two segments: BioScience and Medical Products. The Deutsche Bank price target for the stock is $75, and the consensus target is slightly higher at $77. Investors are paid a 2.7% dividend.

Emerson Electric Co. (NYSE: EMR) is the industrials ROE champion. Last week the company announced the creation of a new thermal management business to expand its ability to develop and deliver more holistic, next-generation approaches to controlling the data center environment. Deutsche Bank has a $60 price target, the same as the consensus target. Shareholders receive a 2.9% dividend.

Seagate Technology PLC (NASDAQ: STX) is one of two technology high-ROE stocks to make the grade. The company is one of the world’s dominant hard drive manufacturers and is a top dividend-paying stock on the Nasdaq 100 index. Its profits from laptop data storage devices decreased in the most recent quarter, but overall sales are growing strong. The Deutsche Bank target for the stock is $46, but the consensus target is lower at $42. Investors receive a 3.3% dividend.

Maxim Integrated Products Inc. (NASDAQ: MXIM) also tops the tech ROE rankings. The company is one of the top holdings in Ken Griffin’s Citadel Investment Group’s portfolio with a position of more than six million shares. The company’s revenue grew by 6% in its most recent quarter, compared with the same period in the previous fiscal year, a rate that seems in line with the trailing price-to-earnings (P/E) ratio of 18. Deutsche Bank has placed a $32 target on the stock, while the consensus target is $33. Investors are paid a 3.4% dividend.

Total return continues to be the name of the game for investors. In addition to solid dividends, investors always have the ability to sell covered call options on their stock holdings. This allows the seller of the contract to call you away at a price higher than where you own the stock. The option premium, added to dividends and any capital gains, can make for a powerful three-way total return strategy.

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