2 High Dividend Stocks For Reliable Income in a Risky Market

If you're hungry for stable 3%-to-4% yield stocks that come equipped with a track record of at least five years of growing pay-outs, we've got just what you need.

Bakery foods seller Flower Foods (FLO) and containerboard producer Packaging Corp of America (PKG) are two contenders that may be under-the-radar at this time, but are definitely worth your attention. They're both robust moneymaking machines that won't let you down.

Flowers Foods is a leading manufacturer of packaged bakery foods in the country. The company currently operates over 40 extremely proficient bakeries, producing a wide range of bakery foods for retail and foodservice customers in the U.S.

It's true the soft second-quarter results and inquiries from the Department of Labor into its contractor model, have hurt the stock.

In the past month, shares have dropped over 15%, sharply under-performing processed and packaged goods peers like Snyder's-Lance, Golden Enterprises and Campbell Soup.

That said, Flower Foods continues to boast rock-solid dividend credentials. Offering an out-sized 4.30% yield (versus the consumer goods average of 1.78%), Flowers Foods boasts of rising dividends for 10 straight years. Between 2011 and 2015, dividends have witnessed a 12%-plus upswing year on year.

Backed by its robust over $200 million annual free cash flows, Flowers Foods dividends are reliable and growing. The company should be able to tackle its highly competitive environment, which is right now in the throes of a softening consumer demand.

In terms of earnings, the company should clock an 8.3% earnings-per-share (EPS) boost every year for the next half a decade.

Further, given its focus on protecting market shares, supporting growing brands and achieving strategic priorities, Flower Foods will only reinforce and redeem itself in the years to come.

We also recommend you watch out for its Project Centennial, designed to undertake a comprehensive business and cost structure review. Flowers Foods will continue hiking dividends at a steady run-rate, generating more cash for its shareholders.

A Package of Income

With higher pricing looming down the road, Packaging Corp of America's stock gained 15% in just three months and is certain to keep darting forwards. The company is the fourth largest manufacturer of containerboards in the U.S. It's also the third largest maker of uncoated freesheets in North America.

The stock's dividend-driver reputation is what interests us. The company recently announced $0.63/share quarterly dividends (payable Oct 14. for shareholders of record Sept. 15), translating into a 14.5% increase from prior dividends of $0.55.

PCA offers a hefty 2.7% dividend yield. Its pay-out ratio of less than 50% indicates the clear scope and potential to consistently bring in value over the years. And five years of regular dividend hikes, this company has proven itself as a sure-fire income creator.

While paper stocks like International Paper (IP) , WestRock (WRK) , KapStone Paper and Packaging (KS) and Clearwater Paper (CLW) as well as PKG have witnessed a fair amount of adversity driven by pricing concerns, fortunes are taking a turn for the better at this time.

With a dependable 7.6% annual EPS growth prospect for the next half a decade, Packaging Corp is a far smarter option than International Paper (~5.3%), Clearwater Paper (5%) and KapStone Paper and Packaging Corporation (earnings de-growth). And its industry-leading growth trajectory will only act as a solid buffer for higher dividends for the PKG stock.

If you factor in the relatively safer debt situation, its meteoric annual free cash flow ascent (from $52 million in 2011 to nearly $450 million in 2015), it doesn't take a genius to lock-in on the company's cash-cow capabilities. The company will nearly triple dividends over the next 4-5 years, in-line with the previous half a decade or so.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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