Best Value Mid-Cap Dividend Stocks According To Portfolio123's Ranking

|
 |  Includes: HFC, MATX, OLN
by: Arie Goren

Mid-cap stocks have done well this year. The return of the S&P MidCap 400 index year-to-date is at 27.38%, while the return of the S&P 500 index during the same period is at 24.24%.

Many mid-cap companies are paying dividends. As a matter of fact, 269 companies among the 400 companies which are included in the S&P MidCap 400 index are paying dividends, 119 of them have a dividend yield greater than 2%, 59 companies have a yield greater than 3%, and 30 companies have a yield of over 4%.

A Ranking system sorts stocks from best to worst based on a set of weighted factors. Portfolio123 has a powerful ranking system which allows the user to create complex formulas according to many different criteria. They also have highly useful several groups of pre-built ranking systems, I used one of them the "ValueRank" in this article.

The "ValueRank" ranking system is quite complex, and it is taking into account dividend yield, sales growth, trailing P/E, price-to-book ratio, price-to-sales ratio and return on equity, as shown in the Portfolio123's chart below.

In order to find out how such a ranking formula would have performed during the last 15 years, I ran a back-test, which is available by the Portfolio123's screener. For the back-test, I took all the 7,014 stocks in the Portfolio123's database.

The back-test results are shown in the chart below. For the back-test, I divided the 7,014 companies into fifty groups according to their ranking. The highest ranked group with the ranking score of 98-100, which is shown by the dark blue column in the chart, has given by far the best return, an average annual return of about 22%, while the average annual return of the S&P 500 index during the same period was about 2% (the red column at the left part of the chart). Also, the second and the third group (scored: 96-98 and 94-96) have given superior returns. This brings me to the conclusion that the ranking system is useful.

Click to enlarge

After running the "ValueRank" ranking system on the companies which are included in the MidCap 400 index, on October 30, 2013, before the market open, I discovered the ten best value dividend stocks, which are shown in the charts below. In this article, I describe the three stocks with the best "ValueRank" ranking among the ten stocks. In my opinion, these stocks can reward an investor a significant capital gain along with a rich dividend. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Yahoo Finance, Portfolio123 and finviz.com.

Click to enlarge

Click to enlarge

HollyFrontier Corp. (NYSE:HFC)

HollyFrontier Corporation operates as an independent petroleum refiner and marketer in the United States.

Click to enlarge

Source: company presentation

HollyFrontier has a very low debt (total debt to equity is only 0.16), and it has a very low trailing P/E of 5.77 and a very low forward P/E of 10.54. The price to free cash flow for the trailing 12 months is very low at 14.23, and the price-to-sales ratio is also very low at 0.44. The forward annual dividend yield is at 2.68%, and the payout ratio is only 30.8%. The annual rate of dividend growth over the past five years was very high at 21.14%.

The HFC stock price is 4.11% above its 20-day simple moving average and 3.68% above its 50-day simple moving average. That indicates a short-term and a mid-term uptrend.

HollyFrontier has recorded strong revenue, EPS and dividend growth during the last three years and the last five years, as shown in the table below.

Most of HollyFrontier'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

Source: Portfolio123

The chart below emphasizes the continuous cash returned by the company to its shareholders.

Click to enlarge

Source: company presentation

HollyFrontier will report its latest quarterly financial results on November 05. HFC is expected to post a profit of $0.65 a share.

HollyFrontier has recorded strong revenue, EPS and dividend growth, and considering its compelling valuation metrics, HFC stock can move higher. Furthermore, the rich 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 lower refining margins.

Click to enlarge

Chart: finviz.com

Olin Corp. (NYSE:OLN)

Olin Corporation manufactures and sells chlor alkali products in the United States and internationally.

Olin Corporation has a relatively low debt (total debt to equity is 0.64), and it has a very low trailing P/E of 9.97 and a very low forward P/E of 10.58. The price-to-sales ratio is very low at 0.76, and the price to book value is at 1.78. The forward annual dividend yield is at 3.44%, and the payout ratio is only 43.70%.

The OLN stock price is 2.77% above its 20-day simple moving average and 1.63% above its 50-day simple moving average. That indicates a short-term and a mid-term uptrend.

Olin Corporation has recorded strong revenue growth and moderate EPS growth, during the last year, the last three years and the last five years, as shown in the chart below.

Most of Olin Corp.'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

On October 28, Olin Corporation reported its third-quarter results. The company reported third quarter 2013 net income of $69.7 million, or $0.86 per diluted share, which compares to $28.7 million, or $0.35 per diluted share in the third quarter of 2012. Sales in the third quarter of 2013 were $670.7 million compared to $581.2 million in the third quarter of 2012. In the report, Joseph D. Rupp, Chairman, President, and Chief Executive Officer said:

Olin had a strong third quarter of 2013 during which we increased our cash position by $142.2 million. We also generated $138.8 million of adjusted EBITDA, which is the highest quarterly level in the history of the company. The record adjusted EBITDA was driven by strong volumes and reduced costs in the Winchester business.

Olin Corporation has recorded revenue and EPS growth, and considering its compelling valuation metrics, OLN stock can move higher. Furthermore, the rich dividend represents a nice income.

Click to enlarge

Chart: finviz.com

Matson, Inc. (NYSE:MATX)

Matson, Inc., together with its subsidiaries, operates as an ocean freight carrier in the Pacific. The company operates through Ocean Transportation and Logistics segments.

Click to enlarge

Matson has a trailing P/E of 18.06 and a forward P/E of 16.84. The price-to-sales ratio is very low at 0.72, and the average annual earnings growth estimates for the next five years is at 7.50%. The price to free cash flow is very low at 12.97, and the current ratio is at 1.20. The forward annual dividend yield is at 2.36%, and the payout ratio is only 40%.

The MATX stock price is 0.93% above its 20-day simple moving average, and 3.99% above its 200-day simple moving average. That indicates a short-term and a long-term uptrend.

Most analysts recommend the stock. Among the seven analysts covering the stock, four rate it as a strong buy, and three rate it as a hold.

The chart below emphasizes Matson's cash generation and uses of cash.

Click to enlarge

Source: company presentation

Matson will report its latest quarterly financial results on November 06. MATX is expected to post a profit of $0.49 a share.

Matson has good valuation metrics, and solid earnings growth prospects, and considering the fact that the stock is in a short-term and a long-term uptrend, MATX stock still has room to go up. Furthermore, the rich dividend represents an income.

Risks to the expected capital gain and to the dividend payment include; a downturn in the U.S. economy and a decline in sea freight rates.

Click to enlarge

Chart: finviz.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.