As a longtime follower of Amy Calistri's
and Carla Pasternak's
, I am well aware of the importance ofdividend yield and
reinvestment as the key to a successful retirement plan.
Dividend reinvestment canmean the difference between a
comfortable retirement and a stressful one. Investing in
companies with strong records of dividend increases and then
reinvesting the proceeds is a surefire way to quickly build your
Although more speculative than purchasing the proven dividend
producers, I like to look off the beaten track for companies that
have recently started paying dividends and have largecash
reserves. In addition, the companies that catch my interest are
either growing rapidly or are undergoing changes that may enable
steady growth and increased dividend payouts over time.
With this in mind, here are twostocks that could soon turn
into dividend machines.
Dunkin' Brands Group (Nasdaq: DNKN)
This company is famous for its Dunkin' Donuts and Baskin-Robbins
franchises. In many areas of the U.S., Dunkin' Donuts rivals
as the top coffee chain.
Founded in the 1950s, the company went public in 2011 at $19 a
share.Shares have since doubled to a recent price near $40.
What I like most about Dunkin' Brands is its
franchise-expansion method. This expansion tactic relies on the
cash infusion of the individual franchisees to fuel growth. This
means the company is able to return its excess cash to
shareholders in the form a dividend rather than burning it in
Dunkin' began paying a dividend lastyear and increased it by
27% in January. The dividend is currently 76 cents a share with a
2% yield. This may seem low, but profits are expected to increase
by 15% during the next several years. The dividend is likely to
increase along with profits. Technically, the company has been in
a steady uptrend since mid-November.
Supported by the50-day moving average , thestock has just
tested support, bouncing higher. This creates a solid technical
entry level with a 12-month target price of $43.
True Religion Apparel (Nasdaq: TRLG)
If you spend any time at your local mall, you are probably aware
of True Religion jeans.
Having a cultlike following befitting its unusual name, True
Religion operates 122 U.S. retail stores with a presence in 50
countries on six continents. Founded in 2002, the company has
struggled recently to remain relevant in the face of heavy
Last quarter, the company was able to squeeze out a 1.5%
increase in comparablesales , but that came after a 4.7% drop in
the previous quarter. Founder Jerry Lubell recently stepped down
asCEO , providing the company a chance to re-evaluate its
I like that True Religion is forecasting 20% growth in
internationalrevenue and is planning toopen 14 new international
locations this year. Despite its struggles, the company boasts
$200 million in cash and had sales of $467 million last year.
This copious cash hoard equals $8.50 per share.
True Religion began paying a quarterly dividend of 2 cents a
share in May 2012. If the new CEO can refocus the company on its
roots in the moneymaking denim jeansmarket , and the
international expansion turns out as expected, the dividendwill
have room to grow.
In addition, the company has begun a strategic review that
includes a possiblesale at up to $37 per share. Technically, the
stock has hitresistance at $28. A breakout close above this level
and a 12-month target price of $33 makes sense.
Risks to Consider:
Even the most solid of companies can suffer from unexpected
happenings. Dunkin' Brands is the less risky of the two
companies. In contrast, the cultlike following of True Religion,
combined with its management changes and possiblebuyout , makes
it a tempting, if speculative,investment . Always use stops and
position size properly when investing.
Action to Take -->
I like Dunkin' Brands as a long-term hold. True Religion is a
speculative play, suitable only for risk-embracing investors, but
the jeans maker has majorupside in terms of growth and
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