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Arie Goren, Portfolio123 (474 clicks)
Long only, value, research analyst, dividend investing
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[Editor's Note: The author has replaced all annual return charts post-publication, with the following explanation - I tried to also show the return without dividends in order to emphasize the importance of the dividend yield. But since I could not get the correct historical prices adjusted for stock splits, I had to omit this information. This does not make any difference to the conclusion of this article.]

In this article, I will give the corresponding fundamental parameters for the five S&P 100 top-dividend yielders, and my own opinion about them. Nonetheless, these data and my opinion should only serve as a basis for further research. All the data for this article were taken from Yahoo Finance and finviz.com on January 20.

Almost all the mega-cap companies which are included in the S&P 100 index pay dividends. As a matter of fact, 94 companies of them pay dividends. The chart below presents the current annual dividend yield distribution among the S&P 100 companies.

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Data: Zacks

S&P 100 index

Description from Standard & Poor's:

The S&P 100 Index, a sub-set of the S&P 500®, measures the performance of large cap companies in the United States. Known by its ticker symbol, OEX, the index is comprised of 100 major, blue chip companies across multiple industry groups. The primary criterion for index inclusion is the availability of individual stock options for each constituent.

In my previous post, I tried to determine if the five stocks that have the highest dividend yield among the large-cap stocks included in the S&P 500 index are a bargain now. In this article, I try to determine if the five stocks that have the highest dividend yield among the mega-cap stocks included in the S&P 100 index are currently a bargain.

The table and the chart below present the top five highest dividend yielders, their forward annual dividend rate, the forward yield, the payout ratio and the dividend rate of growth for the past five years.

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Exelon Corporation (EXC)

Exelon Corporation, a utility services holding company, engages in the energy generation and distribution business in the United States.

Exelon has a trailing P/E of 16.24 and a very low forward P/E of 11.96, the price-to-sales ratio is at 1.22. The forward annual dividend yield is very high at 6.91%, and the payout ratio is at 112.3%. The annual rate of dividend growth over the past five years was at 3.6%.

EXC has a total cash per share of $1.99 and it is expected to post a profit of $2.85 a share in the current year and $2.55 in 2013, which should be enough to sustain dividend payments of $2.10.

EXC stock is trading 21.34% below its 52-week high, and has 10.6% upside potential based on the consensus mean target price of $33.47.

The table below presents the compound annual growth rate (OTCPK:CAGR) of holding the stock for the last five years, ten years and twenty years.

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Data: Yahoo Finance

Holding the EXC stock during the last five years has given an average annual loss of 12.8%. Holding the EXC stock during the last ten years has given an average annual return of 5.7%, and during the last twenty years an average annual return of 8.4%.

The quite cheap valuation metrics, the very rich dividend and the 10.6% upside potential based on the consensus mean target price of $33.47 make EXC stock quite attractive.

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Data: Yahoo Finance

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Chart: finviz.com

AT&T, Inc. (T)

AT&T Inc., together with its subsidiaries, provides telecommunications services to consumers, businesses, and other providers worldwide.

AT&T has a trailing P/E of 43.43 and a low forward P/E of 13.17. The forward annual dividend yield is quite high at 5.38%, and the payout ratio is very high at 229.9%. The annual rate of dividend growth over the past five years was at 2.4%.

The AT&T stock is trading 11.55% below its 52-week high, and has 9.3% upside potential based on the consensus mean target price of $36.52.

AT&T has a total cash per share of $0.39, and it is expected to post a profit of $2.36 a share in the current year and $2.53 in 2013, which should be enough to sustain dividend payments of $1.80.

AT&T will report its latest quarterly financial results on January 24. AT&T is expected to post a profit of $0.46 a share, a 7.0% rise from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

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Data: Yahoo Finance

Holding the AT&T stock during the last five years has given an average annual return of 3.0%. Holding the AT&T stock during the last ten years has given an average annual return of 8.8%, and during the last twenty years an average annual return of 7.7%.

The quite cheap valuation metrics, the rich dividend, the long history of steadily increasing dividend and the 9.3% upside potential based on the consensus mean target price of $36.52 make AT&T stock quite attractive.

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Data: Yahoo Finance

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Chart: finviz.com

Altria Group Inc. (MO)

Altria Group, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally.

Altria Group has a trailing P/E of 17.33 and a low forward P/E of 13.98. The forward annual dividend yield is quite high at 5.29%, and the payout ratio is at 88.5%. The annual rate of dividend growth over the past five years was negative at -10.1%.

MO has a total cash per share of $1.08 and it is expected to post a profit of $2.21 a share in the current year and $2.38 in 2013, which should be enough to sustain dividend payments of $1.76.

The MO stock is trading 3.28% above its 20-day simple moving average, 3.35% above its 50-day simple moving average and 2.50% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

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Data: Yahoo Finance

Holding the MO stock during the last five years has given a nice average annual return of 14.2%. Holding the MO stock during the last ten years has given a very high annual return of 20.7%, and during the last twenty years an average annual return of 15.5%.

The quite cheap valuation metrics, the rich dividend and the fact that the stock is in an uptrend are all factors that make MO stock quite attractive.

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Data: Yahoo Finance

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Chart: finviz.com

Lockheed Martin Corporation (LMT)

Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, information technology, and cyber security in the United States and internationally.

Lockheed Martin has a very low trailing P/E of 10.73 and a very low forward P/E of 11.43, the price to sales ratio is very low at 0.64. The forward annual dividend yield is quite high at 4.90%, and the payout ratio is only 47.4%. The annual rate of dividend growth over the past five years was very high at 22.3%.

LMT has a total cash per share of $14.47 and it is expected to post a profit of $8.42 a share in the current year and $8.24 in 2013, which is enough to sustain dividend payments of $4.60.

The LMT stock is trading 0.73% above its 20-day simple moving average, 2.50% above its 50-day simple moving average and 6.49% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

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Holding the LMT stock during the last five years has given an average annual return of 0.7%. Holding the LMT stock during the last ten years has given an annual return of 9.0%, and during the last twenty years a nice average annual return of 11.4%.

The cheap valuation, the rich dividend and the fact that the stock is in an uptrend are all factors that make LMT stock quite attractive.

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Data: Yahoo Finance

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Chart: finviz.com

Verizon Communications Inc. (VZ)

Verizon Communications Inc. provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide.

Verizon has a trailing P/E of 39.76 and a low forward P/E of 14.98. The price to free cash flow is very low at 13.91. The forward annual dividend yield is quite high at 4.84%, and the payout ratio is very high at 189.7%. The annual rate of dividend growth over the past five years was at 3.7%.

The VZ stock is trading 10.79% below its 52-week high, and has 9.5% upside potential based on the consensus mean target price of $46.58.

VZ has a total cash per share of $3.62 and it is expected to post a profit of $2.39 a share in the current year and $2.82 in 2013, which should be enough to sustain dividend payments of $2.06.

VZ will report its latest quarterly financial results on January 21. VZ is expected to post a profit of $0.52 a share, the same as the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

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Holding the VZ stock during the last five years has given an average annual return of 7.7%. Holding the VZ stock during the last ten years has given an annual return of 6.6%, and during the last twenty years an average annual return of 7.2%.

The quite cheap valuation metrics, the rich dividend, the long history of steadily increasing dividend and the 9.5% upside potential based on the consensus mean target price of $46.58 make VZ stock quite attractive.

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Data: Yahoo Finance

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Chart: finviz.com

Conclusion

The five mega-cap best dividend yielders are all quite attractive, due mainly to the rich dividend, but I cannot say that they are bargain stocks now.

Source: 5 S&P 100 Top-Dividend Yielders; Are They Bargain Stocks Now?