Seeking Alpha
Long/short equity, deep value, value
Profile| Send Message| ()  

The U.S. fiscal cliff has finally become an ever-present threat to the stability of financial markets. As well, due to the lack of solution the divide has only grown more palpable between bullish and bearish investors on the current issue. The real problem though, is that no investor can truly afford to wait it out in "safe-haven" assets four years after the Financial Crisis of 2008. After all, global interest rates are still being held down at historic lows, which is causing high-grade fixed-income assets to provide low-yield returns.

So what's a bullish or bearish investor to do?

In my opinion, investors should consider putting their money to work with undervalued dividend-paying companies that are posting solid top line growth numbers despite a weak global economy. Still, I often hear investors say that they just can't find these types of dividend stocks or that they simply don't exist.

I decided to seek out and highlight some of these supposedly "invisible" dividend stocks for a few reasons. First, to disprove skeptic investors who say there aren't any opportunities in the stock market right now. Second, to help opportunistic investors who understand that with market uncertainty comes investment opportunities that often play out well over the long term.

Today I specifically looked around the world for dividend stocks that appear undervalued based off their current free cash flow-to-market valuation (FCF/Market Cap.=<12). As well, these dividend stocks also needed to provide at least a yield of 3% or higher.

From this baseline group of undervalued dividend stocks I then narrowed down the list further by focusing on their top line performance over the last year. Only companies that grew their top line by at least 10% or more over the last year made the cut.

Finally, I screened out dividend stocks that operated with a higher-than-average risk profile, which in this case meant operating with a financial leverage ratio greater than 4 in the last quarter.

Theses six dividend stocks are ranked from highest-to-lowest by their CFC/Market Cap. Valuation:

1. Abbot Laboratories (ABT)

Sector

Healthcare

Industry

Drug Manufacturers-Major

Market Cap

$104,340M

Abbot Laboratories is a healthcare drug manufacturer that works on discovering, developing, manufacturing and selling healthcare products. The company currently has a CFC/Market Cap Valuation of 7.22 and is offering a dividend yield of 3.04%. ABT has been able to grow the top line by 10.48% over the last year while keeping a more limited risk profile by operating with a financial leverage ratio of 2.34 over of the last quarter.

2. Dow Chemical (DOW)

Sector

Basic Materials

Industry

Chemicals

Market Cap

$37,356M

Dow Chemical manufactures and sells chemical products used as raw materials to manufacture customer products and services all over the world. The company currently has a CFC/Market Cap Valuation of 5.01 and is offering a dividend yield of 3.66%. DOW has been able to grow the top line by 11.76% over the last year while keeping a more limited risk profile by operating with a financial leverage ratio of 3.5 as of the last quarter.

3. PepsiCo Inc. (PEP)

Sector

Consumer Defensive

Industry

Beverages-Soft Drinks

Market Cap

$108,651M

PepsiCo Inc. manufactures and sells of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. The company currently has a CFC/Market Cap Valuation of 5.01 and is offering a dividend yield of 3.03%. PEP has been able to grow the top line by 14.98 over the last year while keeping a more limited risk profile by operating with a financial leverage ratio of 3.46 as of the last quarter.

4. McDonald's Corporation (MCD)

Sector

Consumer Cyclical

Industry

Restaurants

Market Cap

$89,663M

McDonald's runs and franchises fast-food restaurants around the world. The company currently has a CFC/Market Cap Valuation of 4.36 and is offering a dividend yield of 3.21%. MCD has been able to grow the top line by 12.18% over the last year while keeping a more limited risk profile by operating with a financial leverage ratio of 2.44 as of the last quarter.

5. Norfolk Southern Corporation (NSC)

Sector

Industrial

Industry

Railroads

Market Cap

$19,446M

Norfolk Southern Corporation transports raw materials, intermediate products and finished goods by railroad in the U.S. The company currently has a CFC/Market Cap Valuation of 3.55 and is offering a dividend yield of 3.15%. NSC has been able to grow the top line by 17.40% over the last year while keeping a more limited risk profile by operating with a financial leverage ratio of 3.06 as of the last quarter.

6. ArcelorMittal SA (MT)

Sector

Basic Materials

Industry

Steel

Market Cap

$25,589M

Arcelor Mittal SA is an integrated steel and mining company with operations all over the world. The company currently has a CFC/Market Cap Valuation of .98 and is offering a dividend yield of 3.86%. MT has been able to grow the top line by 20.44% over the last year while keeping a limited risk profile by operating with a financial leverage ratio of 2.15 as of the last quarter.

These highlighted dividend stocks, in my opinion, clearly illustrate that while the fiscal cliff is likely to continue creating investor anxiety in the near term it is also creating potential opportunities for long-term value oriented investors. All that is left to decide now is whether you, as an investor, see the world as a cup half full or half empty.

Source: 6 Undervalued Growth-Oriented Dividend Stocks Worth Considering Regardless Of The Fiscal Cliff Debacle

Additional disclosure: None of the information, analysis, or opinions listed here should be misconstrued as personal investment advice to any individual or entity.