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I have searched for very profitable stocks that pay solid dividends with a very low payout ratio. Those stocks would also have to show a very low price to free cash flow and a very low forward P/E ratio.

I introduced in the finviz.com Screener the following demands:

  • Dividend Yield - Over 1%
  • Payout Ratio - Under 20%
  • Price to free cash flow - Under 10
  • EPS growth next 5 years - Over 5%
  • Forward P/E - Under 15
  • Price to sales - Under 1
  • 20-Day Simple Moving Average - Price above SMA20
  • 50-Day Simple Moving Average - Price above SMA50
  • 200-Day Simple Moving Average - Price above SMA200

As a result, only 10 stocks came out in this article, I describe the three stocks with the lowest market cap among these 10 companies. In my opinion, these stocks can reward an investor a capital gain along with a solid dividend. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Portfolio123, finviz.com and Yahoo Finance, on October 21, 2013, before the market open.

Silicon Motion Technology Corp. (NASDAQ:SIMO)

Silicon Motion Technology Corporation, a fabless semiconductor company, designs, develops, and markets semiconductor solutions for the multimedia consumer electronics market.

Silicon Motion has no debt at all, and it has an extremely low trailing P/E of 4.49 and a very low forward P/E of 12.13. The PEG ratio is exceptionally low at 0.22, and the current ratio is very high at 5.30. The price to book value is very low at 0.42, and the price to cash is very low at 2.74. The price to free cash flow for the trailing 12 months is very low at 2.06, and the average annual earnings growth estimates for the next five years is very high at 20%. The forward annual dividend yield is high at 4.65%, and the payout ratio is only 21%.

The SIMO stock price is 1.20% above its 20-day simple moving average, 8.13% above its 50-day simple moving average and 8.08% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Silicon Motion Technology has recorded strong revenue and EPS growth during the last three years, as shown in the charts below.

Most of Silicon Motion's stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.

(click to enlarge)

Portfolio123

Silicon Motion Technology will report its latest quarterly financial results on October 23. SIMO is expected to post a profit of $0.23 a share, a 56% decline from the company's actual earnings for the same quarter a year ago. Although next quarter EPS estimates are lower than a year ago, EPS estimates for the current year are at $0.90 and are at $1.06 for 2014, which correspond to P/E ratios of 14.32 for the year 2013 and 12.16 for the year 2014, which are low P/E ratios.

On July 29, Silicon Motion Technology reported its second-quarter financial results, which beat EPS expectations by $0.01.

Second Quarter 2013 Financial Highlights

  • Net sales increased 2% quarter-over-quarter to $58.3 million from $57.4 million in 1Q13
  • Gross margin (non-GAAP1) increased to 48.4% from 41.0% in 1Q13
  • Operating expenses (non-GAAP) increased to $16.8 million from $15.6 million in 1Q13
  • Operating margin (non-GAAP) increased to 19.7% from 13.7% in 1Q13
  • Diluted earnings per ADS (non-GAAP) increased to $0.27 from $0.17 in 1Q13

Silicon Motion Technology has recorded strong revenue and EPS growth, and considering its compelling valuation metrics, its strong earnings growth prospects, and the fact that the stock is in an uptrend, SIMO stock can move higher. Furthermore, the very rich dividend represents a gratifying income.

Since the company is very rich in cash ($4.71 a share) and has no debt and its payout ratio is very low, there is hardly a risk that the company will reduce its dividend payment. Risks to the expected capital gain include a downturn in the U.S. economy, and weakness in the consumer electronics market.

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Chart: finviz.com

Black Box Corporation (NASDAQ:BBOX)

Black Box Corporation, a communications system integrator, engages in designing, sourcing, implementing, and maintaining communications solutions worldwide.

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Source: Company presentation

Black Box Corporation has a low debt (total debt to equity is only 0.37), and it has a trailing P/E of 16.89 and a very low forward P/E of 10.11. The price to book value is low at 1.02, and the price-to-sales ratio is very low at 0.50. The price to free cash flow for the trailing 12 months is very low at 8.41, and the average annual earnings growth estimates for the next five years is quite high at 10%. The forward annual dividend yield is at 1.17%, and the payout ratio is only 18%.

The BBOX stock price is 2.63% above its 20-day simple moving average, 6.27% above its 50-day simple moving average and 19.36% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Most of Black Box Corporation's stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.

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Black Box Corporation returns value to its shareholders by stock buyback and by increasing dividend payments, as shown in the charts below.

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Source: Company presentation

Black Box Corporation will report its latest quarterly financial results on October 28. BBOX is expected to post a profit of $0.64 a share, a 14.3% rise from the company's actual earnings for the same quarter a year ago.

Black Box Corporation has compelling valuation metrics, and good earnings growth prospects, and considering the fact that the stock is in an uptrend and trades near book value, BBOX stock still has room to go up. Furthermore, the solid growing dividend represents a nice income.

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Chart: finviz.com

SkyWest Inc. (NASDAQ:SKYW)

SkyWest, Inc., through its subsidiaries, operates a regional airline in the United States.

SkyWest has a very low trailing P/E of 13.04 and a very low forward P/E of 10.06. The price to book value is extremely low at 0.54, and the price-to-sales ratio is also very low at 0.23. The price to free cash flow for the trailing 12 months is very low at 3.92, and the average annual earnings growth estimates for the next five years is at 6.60%. The forward annual dividend yield is at 1.10%, and the payout ratio is only 14%.

The SKYW stock price is 1.03% above its 20-day simple moving average, 4.20% above its 50-day simple moving average and 3.32% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Most of SkyWest's stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.

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SkyWest will report its latest quarterly financial results on November 04. SKYW is expected to post a profit of $0.46 a share, a 15% rise from the company's actual earnings for the same quarter a year ago.

SkyWest has compelling valuation metrics, and solid earnings growth prospects, and considering the fact that the stock is in an uptrend and trades way below book value, SKYW stock still has room to go up. Furthermore, the solid dividend represents a nice income.

Risks to the expected capital gain and to the dividend payment include a downturn in the U.S. economy, and the company's massive debt of $1.56 billion.

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Chart: finviz.com

Disclosure: I am long SIMO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: 3 Interesting Dividend Stocks With A Very Low Price To Free Cash Flow