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Summary

  • Transocean is a name that is deeply undervalued on whatever valuation metric you look at.
  • Phillips 66 has been grinding higher for quite some time now and may be due for a breather.
  • KLA-Tencor has been chugging higher since reaching a local bottom in early May.

The market seems to keep making new highs day after day again and again. I will admit that I come every week preaching about value dividend stocks and when the market sky rockets like it does my dividend portfolio underperforms the broader market, but not by a whole lot. On the days that the market is tepid or actually down, my dividend portfolio more than makes up for the massively up days. This past week was rather strong with the Dow gaining 1.2% for the week while the S&P 500 gained 1.3% and the Nasdaq was up 1.9%. In times like these I love picking up some more shares of value dividend stocks.

Call me a pessimistic optimist, but for now I will continue the course and purchase value stocks for my dividend portfolio. Value investing is the bread and butter of Warren Buffett's money-making strategy. The essence of value investing is basically purchasing a stock at less than market value based on certain metrics. My philosophy on dividend investing is to utilize the forward price to earnings ratio and use a one-year PEG ratio, along with a dividend. I don't necessarily look for a stock with a high yield because I like to see capital appreciation. Because the market may be correcting itself from all-time highs I maintain that it is difficult to find good stocks these days. That's why I'm highlighting a select set of excellent value companies in my dividend portfolio, which have had ex-dividend dates or paid out a dividend during this past week or early next week that people should place on their radar.

Transocean Ltd (NYSE:RIG)

Transocean is an international provider of offshore contract drilling services for oil and gas wells by operating in the contract drilling service and drilling management services business segments. On 07May14, Transocean reported first quarter 2014 earnings of $1.43 per share. This result beat the $1.02 consensus of the 34 analysts covering the company and beat last year's first quarter results by 53.76%. Transocean's PE ratio is among the lowest of any stock in the oil well services & equipment industry and signals that investors have not been willing to pay a premium for this company's business prospects, making it a value stock. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.

The company went ex-dividend on 28May14 with a $0.75 per share dividend which will be paid on 18Jun14 for a yield of 7.04%. In terms of news pertaining to the company during the week, the U.S. Chemical Safety Board cited a faulty blowout preventer in the British Petroleum (BP) oil spill back in 2010. Cameron was the company that made the blowout preventer.

Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is encroaching in middle-ground territory with a current value of 57.93, while the MACD chart below shows the black line above the red line with divergence bars flattening in height, meaning there's no real momentum to the up or downside in the stock. The trend for the stock has been upwards since the middle of March so I'm going to play this one cool and not buy a position here.

(click to enlarge)

Phillips 66 (NYSE:PSX)

Phillips 66 is engaged in producing natural gas liquids and petrochemicals. On 30Apr14, Phillips reported first quarter 2014 earnings of $1.47 per share. This result beat the $1.34 consensus of the 14 analysts covering the company and missed last year's first quarter results by 32.88%. Phillip' PE ratio is below the oil & gas operations industry average and signals that investors are not willing to pay a premium for this stock, making it a value stock. However, during the past year, earnings growth has lagged its historical five year growth rate.

The company went ex-dividend on 15May14 with a $0.50 per share dividend which was paid on 02Jun14 for a yield of 2.37%. In terms of news pertaining to the company, it bought a Gulf Coast crude oil, refined products terminal from Chevron (CVX).

Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is in middle-ground territory with a current value of 58.17, while the MACD chart below shows the black line equal with the red line with decreasing divergence bars, meaning there is bearish momentum on the stock price. I will not be putting any additional capital to work in the name right now.

(click to enlarge)

KLA-Tencor Corp. (NASDAQ:KLAC)

KLAC is engaged in the design, manufacturing and marketing of process control and yield management solutions for the semiconductor and related nano-electronics industries. On 24Apr14, KLAC reported third quarter 2014 earnings of $1.23 per share. This result beat the $1.11 consensus of the 17 analysts covering the company and beat last year's third quarter results by 21.78%. KLAC's PE ratio is below the semiconductors industry average and signals that investors are not willing to pay a premium for this stock, making it a value story. However, during the past year, earnings growth has lagged its historical five year growth rate.

The company went ex-dividend on 15May14 with a $0.50 per share dividend which was paid on 02Jun14 for a yield of 2.69%. In terms of news pertaining to the company, there weren't any press releases issued during this past week.

Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index near overbought territory with a current value of 67.38, while the MACD chart below shows the black line above the red line with flattening divergence bars, meaning the bullish momentum on the stock price is getting tired. I will not be putting any additional capital to work in the name right now.

(click to enlarge)

Conclusion

I've highlighted these names because they are poised to increase their dividends in coming years. It is important in this market to be able to hold onto companies which raise their dividend rates or initiated them, because it is a sign that the underlying company is doing well financially. The importance of these stocks I've highlighted is that they are value plays while the broader market is choppy. I believe we are at a point in the market where we have to look for value.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am long RIG, PSX, KLAC. 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: 1 Tech And 2 Oil Value Dividend Stocks To Put On Your Radar