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

With the U.S. budget crisis in full swing many are speculating that the U.S. economy's road to recovery will likely be hindered due to Congress's continued inability to pass a budget. In addition, with U.S. markets near all-time highs and baby boomers having developed itchy trigger fingers, due to the Financial Crisis, some are arguing this is just a powder keg waiting to go off with the first hint of economic slowing.

So is it time to cash out of the market right now?

In my opinion, the answer is no. In truth I'm taking a contrarian position to the fear mongering that we all see in the media right now for one simple reason: I've identified six middle- to large-cap dividend stocks that, in my view, should wet the appetite of value investors.

What makes them so appealing you ask?

First, from a value investing perspective these medium- to large-cap. dividend stocks are trading at a cheaper Forward P/E valuation than the S&P 500 Index.

What makes them really interesting though is that not only are they cheap from a price-multiple perspective but they've also posted strong double-digit Quarter-over-Quarter sales growth despite the tepid economic environment.

Still, why potentially buy them now when there is so much market uncertainty, right?

All six of the middle- to large-cap. dividend stocks I identified have experienced strong insider buying (X>10%) over the last 3 months.

Why does this matter?

Strong insider buying action is viewed as a very bullish indicator for three reasons:

  1. Management teams have insider knowledge on how the company is currently performing. Therefore, insiders are unlikely to buy company stock if the company is performing poorly.
  2. Strong insider buying implies that company management is confident the company will continue to perform well in future quarters relative to market expectations.
  3. Strong insider buying is often an indication that a company's management team feels the stock is undervalued and that now is an opportune time to buy it at a discounted price.

These six middle- to large-cap dividend stocks listed below deserve further review, in my opinion, because they're trading at cheaper forward P/E valuations than the S&P 500 Index, have posted strong quarter-over-quarter sales growth, and have experienced strong insider buying recently.

The list of dividend stocks is ranked from highest to lowest by market cap:

1. Duke Energy (DUK)

Duke Energy is in the Utilities sector where it operates as an energy company within the United States and South America. Currently, it has a market cap of $46.9B and trades with a Forward P/E valuation of 14.58.

The company currently offers a dividend yield of 4.7% to investors. When reviewing recent insider transactions over the last 3 months I found that it has increased by 11.53%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 64.4% and is adequately capitalized with a Current Ratio of 1.0. This implies that there are not any current liquidity red flags at a high-level review.

As well, Deutsche Bank & Argus recently upgraded the dividend stock from a HOLD to BUY.

2. ConAgra Foods, Inc. (CAG)

ConAgra Foods is in the Consumer Goods sector where it operates as a food company with four segments: Consumer Foods, Commercial Foods, Ralcorp Food Group and Ralcorp Frozen Bakery Products.

Currently, it has a market cap of $12.79B and trades with a Forward P/E valuation of 11.73.

The company currently offers a dividend yield of 3.29% to investors. When reviewing recent insider buying transactions over the last 3 months I found that it has increased by 15.42%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 26.9% and is adequately capitalized with a Current Ratio of 1.3. This implies that there are not any current liquidity red flags at a high-level review.

In addition, Barclays in early September 2013, reiterated its OVERWEIGHT rating for this stock.

3. Herbalife Ltd. (HLF)

Herbalife is in the Consumer Goods sector where it produces and distributes weight management, healthy meals, sports/ fitness, energy, and other nutritional products. Currently, it has a market cap. of $7.12B and trades with a Forward P/E valuation of 12.22.

The company currently offers a dividend yield of 1.74% to investors. When reviewing recent insider buying transactions over the last 3 months I found that it has increased by 78.07%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 18.2% and is adequately capitalized with a Current Ratio of 1.9. This implies that there are not any current liquidity red flags at a high-level review.

4. AGCO Corporation (AGCO)

AGCO is in the Industrial Goods sector where it makes and sells agricultural equipment along with related replacement parts. Currently, it has a market cap. of $6.03B and trades with a Forward P/E valuation of 10.16.

The company currently offers a dividend yield of .65%. When reviewing recent insider buying transactions over the last 3 months I found that it has increased by 81.28%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 13.3% and is adequately capitalized with a Current Ratio of 1.6. This implies that there are not any current liquidity red flags at a high-level review.

5. IAC/Interactive Corp (IACI)

IAC/Interactive is in the Technology sector where it operates as a media and Internet company. Currently, it has a market cap of $4.62B and trades with a Forward P/E valuation of 11.96.

The company currently offers a dividend yield of 1.74%. When reviewing recent insider buying transactions over the last 3 months I found that it has increased by 13.81%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 17.5% and is adequately capitalized with a Current Ratio of 1.8. This implies that there are not any current liquidity red flags at a high-level review.

6. Sinclair Broadcasting Group Inc. (SBGI)

Sinclair Broadcasting is in the Services sector where it owns or provides programming, operations or sales services to television stations all over the U.S. Currently, it has a market cap. of $3.2B and trades with a Forward P/E valuation of 11.47.

The company currently offers a dividend yield of 1.73%. When reviewing recent insider buying transactions over the last 3 months I found that it has increased by 22.97%.

When digging deeper you will see that it has been able to grow the top line quarter-over-quarter by 25.10% and is adequately capitalized with a Current Ratio of 3.6. This implies that there are not any current liquidity red flags at a high-level review.

As well, the Benchmark Company recently upgraded its price target for this stock from $22 to $42 while keeping the stock rated at a BUY. This implies a very bullish price target of almost 100% increase.

Wrapping Up

For value-oriented dividend investors looking for cheap dividend stocks with strong fundamentals despite a tough economic environment, I believe this is a good list to start doing further independent due diligence.

Source: 6 Cheap, Dividend Stocks With Explosive Sales Growth And Bullish Insider Buying Despite U.S. Budget Fears