Seeking Alpha
, Portfolio123 (2,300 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

The Sharpe ratio, introduced by William F. Sharpe from Stanford University in 1966, is a way to examine the performance of an investment by adjusting for its risk. I used the Portfolio123's powerful screener to rank all the S&P 500 stocks, which pay a dividend with a higher than 1% yield and have a payout ratio less than 100%, according to their Sharpe ratio.

The tables below show the best twenty S&P 500 stocks according to this concept. In this article, I describe the first six stocks. In my opinion, these stocks can reward an investor a capital gain along with an income with a lower risk. 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 December 18, before the market open.

(click to enlarge)

(click to enlarge)

Assurant Inc. (NYSE:AIZ)

Assurant, Inc., through its subsidiaries, provides specialized insurance products and related services in North America and internationally.

Assurant has a very low debt (total debt to equity is only 0.34), and it has a very low trailing P/E of 12.53 and a very low forward P/E of 10.57. The PEG ratio is at 1.32, and the average annual earnings growth estimates for the next five years is at 9.50%. The price-to-sales ratio is very low at 0.55, and the price to free cash flow is also very low at 5.72. The forward annual dividend yield is at 1.55%, and the payout ratio is only 17.9%. The annual rate of dividend growth over the past three years was high at 14.11% and over the past five years was also high at 12.08%.

The AIZ stock price is 0.71% above its 20-day simple moving average, 6.41% above its 50-day simple moving average and 22.49% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

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

Source: Portfolio123

On October 23, Assurant reported its third-quarter financial results, which beat EPS expectations by $0.21.

Third-Quarter Highlights

  • 3Q 2013 Net Operating Income of $131.1 million, $1.71 per diluted share
  • 3Q 2013 Net Income of $128.8 million, $1.68 per diluted share
  • 11 percent annualized operating ROE, excluding AOCI, year-to-date
  • 8.2 percent growth in book value per diluted share, excluding AOCI, since year-end
  • 7 percent growth in net earned premiums and fees in 3Q 2013
  • $124 million returned to shareholders in share repurchases and dividends in 3Q 2013
  • $370 million of deployable capital at quarter-end

Assurant has recorded EPS and dividend growth, and considering its compelling valuation metrics, its good earnings growth prospects, and the fact that the stock is in an uptrend, AIZ stock can move higher. Furthermore, the solid growing dividend represents a nice income.

AIZ Dividend Chart

(click to enlarge)

Chart: finviz.com

The Boeing Company (NYSE:BA)

The Boeing Company, together with its subsidiaries, engages in the design, development, manufacture, sale, and support of commercial jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide.

Boeing has a trailing P/E of 24.13 and a forward P/E of 18.06. The price to free cash flow is very low at 13.59, and the average annual earnings growth estimates for the next five years is quite high at 11.30%. The forward annual dividend yield is at 2.15%, and the payout ratio is only 33.1%. The annual rate of dividend growth over the past five years was at 4.10%.

The BA stock price is 1.35% above its 20-day simple moving average, 4.89% above its 50-day simple moving average and 27.53% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

Analysts recommend the stock. Among the 26 analysts covering the stock, twelve rate it as a strong buy, eleven rate it as a buy and only three rate it as a hold.

Boeing has recorded strong EPS growth, during the last three years, as shown in the table below.

On December 16 Boeing announced that the Boeing board of directors authorized an additional $10 billion for the company's share repurchase plan and declared that the company's regular quarterly dividend will increase by approximately 50 percent to 73 cents per share. In the announcement, Chairman, President and Chief Executive Jim McNerney explained:

These actions reflect sustained, strong operational performance by our businesses, increasing cash flow, and our confidence in the future. Our team's relentless focus on business execution and competitiveness is providing the financial strength to continue investing in our core businesses while increasing our returns to shareholders.

Boeing has recorded EPS and dividend growth, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, BA stock can move higher. Furthermore, the solid growing dividend represents a nice income.

BA Dividend Chart

(click to enlarge)

Chart: finviz.com

Western Digital Corporation (NASDAQ:WDC)

Western Digital Corporation, through its subsidiaries, develops, manufactures, and sells storage products and solutions that enable people to create, manage, experience, and preserve digital content.

(click to enlarge)

(click to enlarge)

Source: company presentation

Western Digital has a very low debt (total debt to equity is only 0.29), and it has a trailing P/E of 21.44 and a very low forward P/E of 9.94. The price to free cash flow is very low at 10.27, and the average annual earnings growth estimates for the next five years is at 1.47%. The forward annual dividend yield is at 1.44%, and the payout ratio is only 25.1%. The annual rate of dividend growth over the past three years was high at 14.11% and over the past five years was also high at 12.08%.

The WDC stock price is 8.85% above its 20-day simple moving average, 14.43% above its 50-day simple moving average and 32.19% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

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

On October 24, Western Digital reported its first-quarter fiscal 2014 financial results, which beat EPS expectations by $0.07. The company reported revenue of $3.8 billion and net income of $495 million, or $2.05 per share for its first fiscal quarter ended September 27, 2013. On a non-GAAP basis, net income was $514 million or $2.12 per share. In the year-ago quarter, the company reported revenue of $4.0 billion, net income of $519 million, or $2.06 per share. Non-GAAP net income in the year-ago quarter was $594 million, or $2.36 per share.

Western Digital has recorded strong revenue growth, and considering its compelling valuation metrics, and the fact that the stock is in an uptrend, WDC stock can move higher. Furthermore, the solid growing dividend represents a nice income.

Risks to the expected capital gain include a downturn in the U.S. economy, and weakness in the consumer electronics market.

WDC Dividend Chart

(click to enlarge)

Chart: finviz.com

AmerisourceBergen Corporation (NYSE:ABC)

AmerisourceBergen Corporation sources and distributes pharmaceutical products to healthcare providers, pharmaceutical and biotech manufacturers, and specialty drug patients in the United States and internationally.

AmerisourceBergen has a trailing P/E of 32.55 and a forward P/E of 15.89. The price-to-sales ratio is very low at 0.18, and the average annual earnings growth estimates for the next five years is quite high at 13.79%. The forward annual dividend yield is at 1.38%, and the payout ratio is only 39.7%. The annual rate of dividend growth over the past three years was very high at 38.13% and over the past five years was also very high at 41.11%.

The ABC stock price is 2.16% above its 50-day simple moving average and 17.48% above its 200-day simple moving average. That indicates a mid-term and a long-term uptrend.

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

On October 31, AmerisourceBergen reported its fourth-quarter fiscal 2013 financial results, which beat EPS expectations by $0.05 and beat on revenues. The company reported that in its fiscal year 2013 fourth quarter ended September 30, 2013, adjusted diluted earnings per share from continuing operations increased 2.6 percent to $0.79, which excludes LIFO expense and warrant expense (net of related tax impact). Revenue increased 28.3 percent to $24.5 billion in the quarter. For the fiscal year 2013, adjusted diluted earnings per share from continuing operations increased 6.1 percent to $3.14. Revenues increased 12.7 percent to $88.0 billion for the fiscal year. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share from continuing operations were $0.22 for the September quarter and $2.10 for fiscal 2013.

AmerisourceBergen has recorded revenue, EPS and dividend growth, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, ABC stock can move higher. Furthermore, the solid strong growing dividend represents a nice income.

ABC Dividend Chart

(click to enlarge)

Chart: finviz.com

Delphi Automotive PLC (NYSE:DLPH)

Delphi Automotive PLC manufactures vehicle components; and provides electrical and electronic, powertrain, safety, and thermal technology solutions for the automotive and commercial vehicle markets worldwide.

(click to enlarge)

(click to enlarge)

(click to enlarge)

Source: Barclays Global Automotive Conference

Delphi Automotive has a trailing P/E of 17.85 and a very low forward P/E of 12.16. The PEG ratio is at 1.25, and the average annual earnings growth estimates for the next five years is quite high at 14.23%. The forward annual dividend yield is at 1.14%, and the payout ratio is only 15.1%.

The DLPH stock price is 3.30% above its 20-day simple moving average, 4.26% above its 50-day simple moving average and 15.17% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

On November 05, Delphi Automotive reported its third-quarter financial results, which beat EPS expectations by $0.03 and was in line on revenues.

Third-Quarter Highlights

  • Third-quarter U.S. GAAP diluted earnings per share of $0.87 compared to $0.84 in the prior year; Year-to-date diluted earnings per share of $2.92 compared to $2.89 in the prior year
  • Excluding special items, third-quarter earnings of $0.97 per diluted share, an increase of 15% compared to $0.84 per diluted share in the prior year; Year-to-date diluted earnings of $3.28 compared to $2.93 per diluted share in the prior year
  • Third-quarter revenue of $4.0 billion, up 10% over the same period in 2012; up 3% adjusted for the impacts of currency, commodities, acquisitions and divestitures
  • Generated year-to-date operating cash flow of $1,070 million
  • Executed $120 million of share repurchases in the third quarter of 2013; share repurchases year-to-date of $362 million

Delphi Automotive has cheap valuation metrics, and considering its strong earnings growth prospects, and the fact that the stock is in an uptrend, DLPH stock can move higher. Furthermore, the solid dividend represents an income.

DLPH Dividend Chart

(click to enlarge)

Chart: finviz.com

Ameriprise Financial, Inc. (NYSE:AMP)

Ameriprise Financial, Inc., through its subsidiaries, provides a range of financial products and services in the United States and internationally.

Ameriprise Financial has a trailing P/E of 15.87 and a very low forward P/E of 13.94. The PEG ratio is very low at 0.80, and the average annual earnings growth estimates for the next five years is very high at 19.80%. The forward annual dividend yield is at 1.92%, and the payout ratio is only 27.5%. The annual rate of dividend growth over the past three years was very high at 40.58% and over the past five years was also very high at 25.71%.

The AMP stock price is 1.19% above its 20-day simple moving average, 6.36% above its 50-day simple moving average and 25.65% above its 200-day simple moving average. That indicates a short-term, a mid-term and a long-term uptrend.

Ameriprise Financial 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.

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

(click to enlarge)

(click to enlarge)

Source: company presentation

On October 29, Ameriprise Financial reported its third-quarter financial results, which beat EPS expectations by $0.18. The company reported record third-quarter 2013 results. Net income in the quarter was $381 million, or $1.86 per diluted share, up from $174 million, or $0.79 per diluted share, a year ago. Operating earnings increased 36 percent to a record $392 million compared to $289 million a year ago, and operating earnings per diluted share increased 45 percent to $1.91.

Ameriprise Financial has recorded strong revenue, EPS and dividend growth, and considering its cheap valuation metrics, its strong earnings growth prospects, and the fact that the stock is in an uptrend, AMP stock can move higher. Furthermore, the rich growing dividend represents a nice income.

AMP Dividend Chart

(click to enlarge)

Chart: finviz.com

Source: S&P 500 Best Dividend Stocks Based On Reward To Risk Ratio