We screened for large cap dividend stocks with low PEG ratios, 3%-plus dividend yields, and attractive options yields for both covered calls and cash secured puts. We've added them this week to our Covered Calls table and to our Cash Secured Puts table.
These are short-term trades, (5-6 months), that should capitalize on the current low PEG ratios for next year for these 3 firms:
Conoco Philips (NYSE:COP): A major integrated Oil & Gas co., (Basic Materials sector), COP's revenues increased 42% to $95.89B for the six months ended 30 June 2010. Net income totaled $6.3B, up from $1.7B for the same period. (These figures include the sale of Syncrude). ConocoPhillips intends to sell the remaining 60% of its entire stake in Lukoil (OTCPK:LUKOY) for $3.44 billion in 2011. (Source: Morningstar)
Eaton Corp. (NYSE:ETN): An Industrial & Electrical Equipment firm, (Industrial Goods sector). Eaton Corporation's revenues increased 13% to $6.48B for the six months ended 30 June 2010, and net income totaled $381M vs. a loss $21M year-over-year. Revenues reflect a rise in the income from Truck segment, the Automotive segment,the international Electrical segment, and higher sales from their Hydraulics segment. International sales have grown from 20% of the total in 2000 to 55% in 2009 (including 22% to developing markets, up from 8%). Eaton now serves a wide swath of industrial markets, including aerospace, energy, agriculture, and construction. (Source: Morningstar)
McGraw Hill (MHP): A major Publisher, (Services sector), MHP was founded in 1888, and is a member of the S&P Dividend Aristocrats, an elite group of firms who've increased their dividends every year for a minimum of the past 25 years. MHP's revenues increased 2% to $2.66B for the six months ended 30 June 2010, and net income increased 30% to $294.4M. Revenues reflect an increase in income from Financial Services and higher income from McGraw-Hill education segment. McGraw-Hill's branded information services include the likes of Standard & Poor's, J.D. Power & Associates, Platts, Aviation Week, and McGraw-Hill Education. (Source: Morningstar)
All 3 of these dividend paying stocks have options trading available. Considering the current wave of uncertain expectations descending upon the economy and the market, income investors looking for near-term income may want to consider selling covered calls or cash secured puts, both of which offer higher yields than these firms' dividends. Our Covered Calls table also lists the dividends prior to expiration and options symbols for these trades.
(Note: Option yields below are annualized for ease of varying time-length comparison. Put Yields are based upon 100% cash reserve.):
Here are the valuation comparisons:
As you can see from the valuation table, MHP's 5-year PEG ratio jumps way up to 1.56 due to its lower 5-year growth forecast.
Here are key efficiency and financial ratios:
Conoco Philips is currently also listed in the Energy section of our High Dividend Stocks By Sector Tables.
Disclosure: No positions at this time.