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I have searched for highly profitable companies that are included in the S&P 500 Index that pay solid dividends, and that have raised their payouts at a high rate for the last five years. Those stocks would have to show also a very low trailing and forward P/E ratio. I also looked for companies that are in a short-term, mid-term and long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.

I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research. All the data for this article were taken from Yahoo Finance and finviz.com.

The screen's formula requires all stocks to comply with all following demands:

  1. The forward dividend yield is greater than 2.60%.
  2. The payout ratio is less than 55%.
  3. The annual rate of dividend growth over the past five years is greater than 5%.
  4. Trailing P/E is less than 12.
  5. Forward P/E is less than 12.
  6. The price-to-sales ratio is less than 1.0.
  7. Stock price is above 20-day simple moving average (short-term uptrend).
  8. Stock price is above 50-day simple moving average (mid-term uptrend).
  9. Stock price is above 200-day simple moving average (long-term uptrend).

After running this screen on May 09, 2013, before the market open, I discovered the following four stocks:

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Lockheed Martin Corporation (NYSE:LMT)

Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and the sustaining of advanced technology systems and products for defense, civil, and commercial applications in the United States and internationally.

Lockheed Martin has a very low trailing P/E of 11.74 and a very low forward P/E of 11.29. The price-to-sales ratio is extremely low at 0.69, and the average annual earnings growth estimates for the next five years is quite high at 7.22%. The forward annual dividend yield is very high at 4.52%, and the payout ratio is at 53%. The annual rate of dividend growth over the past five years was very high at 22.32%, and over the last ten years was also remarkably high at 26.45%.

The LMT stock price is 3.77% above its 20-day simple moving average, 7.90% above its 50-day simple moving average and 12.36% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On April 23, Lockheed Martin reported its first-quarter 2013 financial results.

First-quarter 2013 highlights

  • Net sales decreased 2 percent to $11.1 billion
  • Net earnings increased 14 percent to $761 million
  • Earnings per diluted share increased 15 percent to $2.33
  • Generated cash from operations of $2.1 billion
  • Repurchased 5.1 million shares for $0.5 billion
  • Revised 2013 sales outlook

In the report, Lockheed Martin Chief Executive Officer and President Marillyn Hewson said:

Our team delivered strong results this quarter by focusing on program execution and delivering on our commitments to customers. While the impact of sequestration on our business has been limited to date, we continue to work closely with our customers to better understand the future impact sequestration may have on our programs. Despite the challenging budget environment, we will continue to innovate and deliver value to our customers and shareholders.

The compelling valuation metrics, the very rich dividend and the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend are all factors that make LMT stock quite attractive.

LMT Dividend Chart

LMT Dividend data by YCharts

Chart: finviz.com

Exxon Mobil Corporation (NYSE:XOM)

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products.

Exxon Mobil has a very low debt (total debt to equity is only 0.07) and has a very low trailing P/E of 9.46 and a very low forward P/E of 11.13. The price-to-sales ratio is very low at 0.87, and the price to free cash flow for the trailing 12 months is at 34.53. The forward annual dividend yield is at 2.75%, and the payout ratio is only 26%. The annual rate of dividend growth over the past five years was very high at 10.24%, and over the last ten years was also very high at 9.49%.

The XOM stock price is 3.73% above its 20-day simple moving average, 3.07% above its 50-day simple moving average and 3.74% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On April 25, Exxon Mobil reported its first-quarter 2013 financial results, which beat EPS expectations.

First-quarter 2013 highlights

  • Earnings of $9,500 million increased $50 million or 1% from the first quarter of 2012.
  • Earnings per share (assuming dilution) were $2.12, an increase of 6%.
  • Capital and exploration expenditures were $11.8 billion, up 33% from the first quarter of 2012.
  • Oil-equivalent production decreased 3.5% from the first quarter of 2012. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production decreased 1.2%.
  • Cash flow from operations and asset sales was $14 billion, including proceeds associated with asset sales of $0.4 billion.
  • Share purchases to reduce shares outstanding were $5 billion.
  • Dividends per share of $0.57 increased 21% compared to the first quarter of 2012.

In the report, Exxon Mobil's chairman Rex W. Tillerson commented:

ExxonMobil achieved strong results during the first quarter of 2013, while investing significantly to develop new energy supplies. ExxonMobil's financial performance enables continued investment to deliver the energy needed to help meet growing demand, support economic growth, and raise living standards around the world.

The very low multiples, the solid dividend and the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend are all factors that make XOM stock quite attractive.

XOM Dividend Chart

XOM Dividend data by YCharts

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Xerox Corporation (NYSE:XRX)

Xerox Corporation provides business process and document management services worldwide.

Xerox Corporation has a very low trailing P/E of 9.57 and a very low forward P/E of 7.52. The PEG ratio is at 1.43, and the price-to-sales ratio is very low at 0.49. The price to free cash flow for the trailing 12 months is extremely low at 6.12, and the average annual earnings growth estimates for the next five years is quite high at 6.67%. The forward annual dividend yield is at 2.61%, and the payout ratio is only 25%. The annual rate of dividend growth over the past five years was at 6.17%.

The XRX stock price is 1.49% above its 20-day simple moving average, 2.74% above its 50-day simple moving average and 17.73% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On April 23, Xerox Corporation reported its first-quarter 2013 financial results, which beat EPS expectations and missed expectations on revenues. The company announced first-quarter 2013 adjusted earnings per share of 27 cents, which includes a 2 cent benefit from a reserve reduction related to recent litigation developments. Adjusted EPS excludes 4 cents related to amortization of intangibles, resulting in GAAP EPS of 23 cents. In the first quarter, total revenue of $5.4 billion was down 3 percent. Revenue from the company's services business was up 4 percent and represents 55 percent of total revenue.

In the report, Ursula Burns, Xerox chairman and chief executive officer said:

We delivered solid revenue growth in our services business along with a stable segment margin and a 64 percent increase in the total contract value of signings to $3.7 billion. While results in our services business align with our growth strategy and our expectations, challenges in our document technology business continued during the first quarter.. Revenue from the company's document technology business, representing 40 percent of total revenue, was down 9 percent, which had an adverse impact on segment margin as market conditions and the timing of a recent product platform launch put pressure on the sale of document systems, supplies and related services. In February, Xerox announced ConnectKeyTM, a software system embedded in 16 new Xerox multifunction printers, many of which began shipping in the second quarter.

All these factors -- the very low multiples, the fact that the stock is trading way below its book value (price to book value is only 0.91), the solid dividend, the fact that the company consistently has raised dividend payments and the fact that the stock is in an uptrend -- make XRX stock quite attractive.

XRX Dividend Chart

XRX Dividend data by YCharts

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Chart: finviz.com

Northrop Grumman Corporation (NYSE:NOC)

Northrop Grumman Corporation provides systems, products, and solutions in aerospace, electronics, information systems, and technical service areas to government and commercial customers worldwide.

Northrop Grumman has a low debt (total debt to equity is only 0.42) and has a very low trailing P/E of 9.87 and a very low forward P/E of 10.50. The price-to-sales ratio is very low at 0.73, and the price to free cash flow for the trailing 12 months is also very low at 9.54. The forward annual dividend yield is at 2.83%, and the payout ratio is only 28%. The annual rate of dividend growth over the past five years was quite high at 8.25%, and over the last ten years was very high at 10.64%.

The NOC stock price is 6.00% above its 20-day simple moving average, 11.00% above its 50-day simple moving average and 15.89% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

On April 24, Northrop Grumman reported its first-quarter 2013 financial results. The company reported first-quarter 2013 net earnings of $489 million, or $2.03 per diluted share, compared with $506 million, or $1.96 per diluted share, in the first quarter of 2012. First-quarter 2013 diluted earnings per share are based on 241 million weighted average shares outstanding compared with 258 million shares in the first quarter of 2012, a 7 percent decrease. The company repurchased 6.5 million shares of its common stock in the 2013 first quarter; $1 billion remains on its current share repurchase authorization.

In the report, Wes Bush, chairman, chief executive officer and president said:

Strong operating performance and effective cash deployment drove first quarter results. Looking ahead, we recognize that we are operating in an uncertain and constrained budget environment. We are maintaining our focus on program performance, effective cash deployment and portfolio alignment as we drive to best serve our shareholders, customers and employees.

The compelling valuation metrics, the solid dividend and the fact that the company consistently has raised dividend payments, and the fact that the stock is in an uptrend are all factors that make NOC stock quite attractive.

NOC Dividend Chart

NOC Dividend data by YCharts

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Chart: finviz.com

Source: 4 S&P 500 Solid-Yielding Stocks With Low P/E Ratio In An Uptrend