In the never-ending search for yield, investors reportedly might be overlooking a patch in the market with offerings ripe for harvest: mid-cap stocks.
Barron’s said it looked for a handful of mid-cap companies that have yields of at least 2% and that grew their “free cash flow” in 2018 from the previous year.
Barron’s defined free cash as operating cash flow minus capital expenditures. A barometer of a company’s financial health, free cash can be used to pay down debt, make acquisitions, repurchase shares, or fund dividends.
Highlighting three of Barron’s picks:
Sabre (SABR), known for its airline reservations software, sports the highest yield, at 2.7%. The company has paid a quarterly dividend of 14 cents a share for about two years.
Shares of ManpowerGroup (MAN), which handles temporary staffing, were recently yielding 2.4%, the second highest on the list. The stock has struggled, with a one-year return of minus 28%. But on the plus side for dividend investors, the company’s free cash flow totaled $418 million in 2018, up from about $346 million the previous year. Last May, ManpowerGroup declared a semiannual dividend of $1.01 a share, up 8.6% from 93 cents.
Webster Financial (WBS), the only bank included in the table, yields 2%. Its stock has a one-year return of minus 1.4%, a reflection of the tough environment for banks amid concerns about an economic slowdown. Webster pays a quarterly dividend of 33 cents a share. The payout was raised more than 25% about a year ago.
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