Most dividends can be real snoozers, range trading for years, while investors wait for their reinvested income to be put to work. That's why investors get excited when they uncover a big yielder that's actually appreciating in value.
I ran a screen for U.S. traded companies with a market cap over $1 billion that sported a dividend yield over 3%, and then ranked them by their total one-month return.
Here is a look at the results, and a quick reaction to some standouts.
Frontier Communications (NAS: FTR)
Buckle Inc. (NYS: BKE)
GameStop Corp. (NYS: GME)
Hudson City Bancorp (NAS: HCBK)
Macquarie Infrastructure Company
Sunoco Logistics Partners L.P.
Tesoro Logistics LP
SouFun Holdings Ltd.
Chimera (NYS: CIM)
I'm surprised to see Frontier communications leading the pack. They operate in the constantly eroding wireline telecom sector. While known for big dividends, wireline businesses have continued to hurt, as the rise of wireless providers, like Verizon and AT&T, continue to eat their lunch. Frontier cut their dividend earlier this year to save cash, not a good omen for income investors. While they may arguably be the best operator in this space, that's a low bar to set, and not a sector I'd be comfortable putting my money into.
The Buckle has been a long-time recommendation of mine and, after this run, I'm kicking myself for not taking my own advice. Fortunately, the company is still fairly priced for growth going forward, has a habit of a big one-time special dividend each year, and has a laser-focused and dedicated management team. Known for hiring from within, and taking a more restrained and deliberate approach to expansion than many of their competitors, The Buckle is still a great company whose long-term prospects I remain excited about. However, tread with caution here. The teen retail segment remains weak right now, and some of that weakness could affect The Buckle's short-term performance.
Gamestop is, perhaps, the most surprising company to me on this list. In July, retail video games sales plunged 20%, as consumers migrated towards more bite-sized $.99 cent games on mobile devices, and the broad market for video games weakened. Gamestop's profit fell 23% in the most recent quarter and, coupled with the fact that more devices like Microsoft's Xbox are offering their games as downloads, you can see the writing on the wall for this company. I see them as a perpetual value trap, and a company that truly deserves to be this cheap. Quick run-ups like this, while impressive, are not the sort of things long-term market beating is built from. The company is still down 22% year to date and, realistically, has further to fall.
Hudson City Bancshares got their August boost on the announcement that M&T Bank would spend $3.77 billion to purchase the lender. Hudson City has been struggling for some time now, and M&T's life line is probably exactly what they needed. However, since this month's pop is a one-off event, and they're now at their acquisition price, there isn't much left to tell investors.
After the August run, shares of Chimera are effectively flat for the year, but the company still looks very cheap compared to their residential REIT peer group. They still trade for .77x book value, while similar companies are trading for closer to, if not more than, book value. Some of this is probably driven by the fact that Chimera hasn't reported a 10q in a while, and investors are flying a little blind here; but shares got a jolt in early August when the company announced the restatement of earnings dating all the way back to 2008. REITs aren't my specialty, so it's hard to say whether Chimera's jump is anything meaningful to act on; but this company requires a large appetite for risk, and I'd wait for the restatement to actually get a real hold on what the true value of their assets were before making a move.
While it's fun to look at stocks that run up over a short period, dividends are a strategy best played over years, not months. They can be an incredibly potent wealth multiplier, but patience is the key. From August 1950 until today, the total return of the S&P 500 is about 7,300% -- pretty darn good. But with dividends reinvested, that return leaps to a mind-boggling 57,400%.
With the exception of The Buckle, I'm not sold on these five big gainers as candidates for long-term income investing. Instead, I'd suggest the 9 Rock-Solid Dividend Stocks that could help you retire rich. You can uncover these top picks in our premium research report byclicking here now.
The article 5 Huge Dividends That Surged This Month originally appeared on Fool.com.
Austin Smith owns no shares of the companies mentioned hereThe Motley Fool owns shares of GameStop.Motley Fool newsletter serviceshave recommended buying shares of The Buckle.Motley Fool newsletter serviceshave recommended creating a modified stock repair position in GameStop. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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