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Arie Goren, Portfolio123 (473 clicks)
Long only, value, research analyst, dividend investing
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I have searched for highly profitable stocks that pay rich dividends with a low payout ratio among the stocks that are included in the S&P 500 index that are currently in an uptrend. Those stocks would also have to show a low forward P/E and a very low debt.

I used the Portfolio123's powerful screener to perform the search. The screen's formula requires all stocks to comply with all following demands:

  1. The stock does not trade over-the-counter (OTC).
  2. Dividend yield is greater than 2%.
  3. The annual rate of dividend growth over the past five years is greater than 5%.
  4. The payout ratio is less than 75%.
  5. Forward P/E is less than 15.
  6. The PEG ratio is less than 1.50.
  7. Total debt to equity is less than 0.40.
  8. The stock price is above the 20-day simple moving average (short-term uptrend).
  9. The stock price is above the 50-day simple moving average (mid-term uptrend).
  10. The stock price is above the 200-day simple moving average (long-term uptrend).

As a result, only eight stocks came out, as shown in the charts below (the number of stocks left after each demand can be seen in the chart). In this article, I describe the three stocks with the lowest payout ratio among the eight stocks. In my opinion, these stocks can reward an investor a significant capital gain along with a nice income. I recommend readers to 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, on November 07, before the market open.


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Rank

Ticker

Name

Last Price

Market Cap $million

Industry

1

(TRV)

Travelers Companies

87.49

31,855

Insurance

2

(QCOM)

QUALCOMM Inc.

69.74

120,092

Communications Equipment

3

(GLW)

Corning Inc

16.55

23,948

Electronic Equipment, Instruments & Components

4

(XOM)

Exxon Mobil Corp

93.22

407,278

Oil, Gas & Consumable Fuels

5

(ESV)

ENSCO Plc

59.55

13,908

Energy Equipment & Services

6

(CA)

CA Inc

31.99

14,288

Software

7

(INTC)

Intel Corp

24.25

120,570

Semiconductors & Semiconductor Equipment

8

(KLAC)

KLA-Tencor Corp

64.65

10,774

Semiconductors & Semiconductor Equipment

Travelers Companies Inc.

The Travelers Companies, Inc., through its subsidiaries, provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States.

The Travelers has a very low debt (total debt to equity is only 0.26), and it has a very low trailing P/E of 11.17 and a very low forward P/E of 10.75. The price to free cash flow for the trailing 12 months is low at 12.28, and the average annual earnings growth estimates for the next five years is at 8.27%. The forward annual dividend yield is at 2.29%, and the payout ratio is only 23.7%. The annual rate of dividend growth over the past five years was quite high at 10.77%.

The TRV stock price is 1.73% above its 20-day simple moving average, 3.53% above its 50-day simple moving average and 5.78% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

On October 22, The Travelers reported its third-quarter financial results, which beat EPS expectations by $0.30 and was in-line on revenues.

Third-Quarter Highlights

  • Record Quarterly Operating Income per Diluted Share of $2.35, Up 6% from Prior Year Quarter.
  • Return on Equity and Operating Return on Equity of 13.9% and 15.2%, Respectively.
  • Strong net and operating income of $864 million and $883 million, respectively, generally consistent with the prior year quarter.
  • Continued improvement in underlying underwriting margins.
  • Written rate gains continued to exceed expected loss cost trends in all segments.
  • Total capital returned to shareholders of $985 million in the quarter, including $800 million in share repurchases. Year-to-date total capital returned to shareholders of $1.952 billion.
  • Board of Directors authorizes an additional $5.0 billion of share repurchases.
  • Increase in book value per share of 1% to $68.15 and increase in adjusted book value per share of 8% to $63.87 from year-end 2012.

The Travelers has compelling valuation metrics and good earnings growth prospects, and considering its good latest quarter financial results and the fact that the stock is in an uptrend, TRV stock can move higher. Furthermore, the rich growing dividend represents a nice income.

TRV Dividend Chart


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Chart: finviz.com

QUALCOMM Incorporated

QUALCOMM Incorporated designs, develops, manufactures, and markets digital telecommunications products and services.

QUALCOMM has no debt at all, and it has a trailing P/E of 18.55 and a low forward P/E of 14.15. The current ratio is very high at 3.20, and the average annual earnings growth estimates for the next five years is also high at 16.67%. The forward annual dividend yield is at 2.01%, and the payout ratio is only 28.5%. The annual rate of dividend growth over the past five years was very high at 16.92%.

The QCOM stock price is 2.08% above its 20-day simple moving average, 2.41% above its 50-day simple moving average and 7.42% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

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

QUALCOMM's growth rates, margins and return on capital have been much better than its industry median, sector median and the S&P 500 median, as shown in the tables below.


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Source: Portfolio123

On November 06, QUALCOMM reported its fourth-quarter fiscal 2013 financial results, which missed EPS expectations by $0.03.

Fourth Quarter Fiscal 2013 Highlights

  • Revenues: $6.48 billion, up 33 percent year-over-year and 4 percent sequentially.
  • Operating income: $1.59 billion, up 29 percent y-o-y and down 5 percent sequentially.
  • Net income: $1.50 billion, up 18 percent y-o-y and down 5 percent sequentially.
  • Diluted earnings per share: $0.86, up 18 percent y-o-y and down 4 percent sequentially.
  • Effective tax rate: 1 18 percent.
  • Operating cash flow: $2.52 billion, up 79 percent y-o-y; 39 percent of revenues.
  • Return of capital to stockholders: $3.91 billion, including $3.32 billion through repurchases of 50.7 million shares of common stock and $592 million, or $0.35 per share, of cash dividends paid.

In the report, Dr. Paul E. Jacobs, chairman and CEO of Qualcomm said:

I am very pleased with our record financial performance this year as we delivered revenues of $25 billion, up 30% versus last year. Our technologies underpin the global growth of wireless data, and our semiconductor solutions are used across the industry's flagship smartphones. Looking forward, we expect continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China with the anticipated launch of LTE. Qualcomm remains well positioned from a growth standpoint, and we expect double-digit compound annual growth rates for both revenues and earnings per share over the next five years.

QUALCOMM has recorded strong revenue, EPS and dividend growth, and considering its good valuation metrics, its strong earnings growth prospects and the fact that the stock is in an uptrend, QCOM stock still has room to go up. Furthermore, the rich growing 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 weakness in the consumer electronics market.

QCOM Dividend Chart


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Chart: finviz.com

Corning Inc.

Corning Incorporated produces and sells specialty glasses, ceramics, and related materials worldwide.

Corning has a very low debt (total debt to equity is only 0.13), and it has a very low trailing P/E of 13.35 and a very low forward P/E of 11.83. The PEG ratio is very low at 0.76, and the average annual earnings growth estimates for the next five years is high at 17.60%. The forward annual dividend yield is at 2.42%, and the payout ratio is only 30.6%. The annual rate of dividend growth over the past three years was very high at 25.93% and over the past five years was also very high at 14.86%.

The GLW stock price is 3.95% above its 20-day simple moving average, 9.65% above its 50-day simple moving average and 16.68% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

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

Corning's margins and return on capital have been much better than that of the industry median, the sector median and the S&P 500 median, as shown in the table below.


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Corning's trailing and forward P/E ratios have been much better than that of the industry median, the sector median and the S&P 500 median, as shown in the table below.


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On October 30, Corning reported its third-quarter results, which beat EPS expectations by $0.01.

Third-quarter performance highlights

  • Core sales were $2.1 billion, an increase of 10% over the comparable period last year. Net sales (GAAP) were $2.1 billion.
  • Core earnings per share were $0.33, demonstrating the fourth consecutive quarter of year-over-year core earnings-per-share growth, and an increase of 18% over a year ago. GAAP earnings per share were $0.28.
  • In the Display Technologies segment, LCD glass sequential price declines continue to be moderate, as expected. Combined sequential LCD glass volume was up slightly.
  • In the Telecommunications segment, sales increased 24% and core net income increased 86%* on a year-over-year basis. GAAP earnings increased 77% for the same period.
  • Core gross margin was 44%, up nearly two percentage points year over year and up slightly sequentially.

Corning has innovating products and it has compelling valuation metrics and strong earnings growth prospects, In my opinion, GLW stock still has room to go up. Furthermore, the rich growing dividend represents a nice income.

Since the company is rich in cash ($3.75 a share) and has very low 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 and to the dividend payment include; a downturn in the U.S. economy and a significant decline in LCD glass price.

GLW Dividend Chart
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Chart: finviz.com

Source: 3 Good-Yielding Large-Cap Stocks With A Very Low Forward P/E Ratio Currently In An Uptrend