Top Dividend Stocks 2014: Hidden Value in These Companies?

Top Dividend Stocks 2014: Hidden Value in These Companies?

After a wild 2013 that saw the stock market climb 30%, income seekers could have more trouble than ever finding the top dividend stocks in 2014. Famed investor Peter Lynch often spoke of looking at the things around us to find the best investments, and as simple as it sounds, that's often the last place that most investors look. Here are three companies that are "hidden in plain sight." Let's take a closer look.

There are two things that are guaranteed to continue: The population will grow, and people will die. Therefore the business of providing and maintaining a place for the remains of loved ones will see higher demand than ever. This is where StoneMor Partners comes in.

StoneMor owns and manages cemeteries and funeral homes and is taking the approach of growth through the consolidation of this very segmented industry. Paying a dividend that yields 9.2% and operating as a limited partnership (which offers certain tax benefits and can increase the payout to investors), much of its growth has been paid for with stock offerings, which can be harmful for investors if not managed carefully. The good news is the company has managed to slightly increase the distribution payout per share (it's up 8% over five years), even as the share count has more than doubled over the past five years.

Future growth could come through agreements like the one signed in November with the Archdiocese of Philadelphia, a 60-year contract to operate 13 cemeteries owned by the Archdiocese that average around 7,000 burials per year. Operational agreements like this provide income to the owners of the cemetery while also removing the administrative costs of maintaining the properties.

No worms here
This week's earnings report has pushed shares of Apple down, largely on iPhone sales that failed to meet projections, as well as the company's expectations that the upcoming quarter's sales will likely be flat year over year. Coming on the heels of the long-awaited deal with China Mobile -- the world's largest wireless company, with nearly 1 billion customers -- flat sales aren't what investors have been expecting to hear. But to focus on only these two things is to miss several things that are arguably more important -- as well as right in front of us.

As the Fool's Tim Beyers points out, iPhone sales were up almost 7% from last year, and Mac and iPad sales both bounced back strongly, up 19% and 14%, respectively. Additionally, CEO Tim Cook reaffirmed on the earnings call that the company still had products in new categories that it would introduce by the end of the year.

Though the dividend is still relatively small at about a 2.2% yield at recent prices, the company has committed to steadily increasing it while also buying back stock. Over the past year, the company has already repurchased almost 5% of shares outstanding -- $24 billion in value -- and is committed to buy back even more. Growth may continue to slow, but share buybacks and steady dividend increases will mean that the growth that matters to investors -- per share -- will continue.

Cooking with gas -- and driving, too?
Integrys Energy Group
is largely a regulated electric and natural-gas utility with a history that goes back to 1849 and the founding of People's Energy in Chicago. Because the company was created in 2007 from a merger of People's Energy and WPS Resources, the share price has actually fallen 6%, but the dividend, currently yielding about 5%, has been increased 30%. Going back to the company's history before the merger, it has paid out a dividend every year for almost 70 years.

But the hidden growth opportunity is a product of the company's expansion into alternative-energy vehicles via retail refueling for natural-gas vehicles, through its Trillium CNG subsidiary. Natural gas can cost more than one-third less than diesel, and the company aims to have 101 stations servicing natural gas to class-8 heavy duty trucks by 2016. With more than 2.8 million trucks on American roads consuming between 10,000 and 20,000 gallons of fuel per year, this is a significant opportunity to grow outside of its regulated utility businesses.

Seeing the trees
The old phrase "not seeing the forest for the trees" tells us to look beyond our surroundings and take in the big picture. Yet sometimes we can find the way to long-term wealth by taking notice of the obvious, like funeral homes and cemeteries, natural-gas utilities, and Apple's efforts to increase per-share returns.

Looking for something different? Check out my Foolish colleagues Selena Maranjian's and Nichole Seghetti's top dividend stocks for 2014.

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Jason Hall owns shares of Apple. The Motley Fool recommends Apple and StoneMor Partners. The Motley Fool owns shares of Apple and StoneMor Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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