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If you are looking to boost your portfolio’s total return, this article might offer an interesting starting point.

To construct this list we looked for companies with the following three characteristics:

- TTM payout ratio < 3-year average payout ratio
- TTM Operating cash flow/revenue > 3-year average operating cash flow/revenue
- Expected annual dividend per share > most recent FY dividend per share

Once we had gathered a universe of over 50 stocks, we compared the current price vs. the analysts’ target price (used as a proxy for fair value) and kept those with the most potential upside.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Considering this information, which of these stocks do you think is the best source of income and potential capital gains?

1. Wells Fargo & Company (WFC): Money Center Banks Industry. Market cap of $140.43B. This stock has a potential upside of 37.11%, given its price of $26.62 and target price of $36.5. Dividend yield at 1.81%. TTM payout ratio 11.06% vs. 3-year average payout ratio at 37.36%. TTM operating cash flow/revenue at 32.23% vs. 3-year average at 23.92%. Expected dividend per share $0.48 vs. most recent dividend per share at $0.2. The stock has lost 4.7% over the last year.

2. Republic Bancorp Inc. (RBCAA): Regional Banks Industry. Market cap of $405.40M. This stock has a potential upside of 34.16%, given its price of $19.38 and target price of $26.0. Dividend yield at 3.18%. TTM payout ratio 12.94% vs. 3-year average payout ratio at 20.54%. TTM operating cash flow/revenue at 55.51% vs. 3-year average at 39.49%. Expected dividend per share $0.59 vs. most recent dividend per share at $0.56. The stock has lost 17.83% over the last year.

3. Joy Global, Inc. (JOYG): Farm & Construction Machinery Industry. Market cap of $8.87B. This stock has a potential upside of 33.78%, given its price of $83.19 and target price of $111.29. Dividend yield at 0.83%. TTM payout ratio 13.78% vs. 3-year average payout ratio at 16.25%. TTM operating cash flow/revenue at 17.37% vs. 3-year average at 14.99%. Expected dividend per share $0.71 vs. most recent dividend per share at $0.7. This is a risky stock that is significantly more volatile than the overall market (beta = 2.01). It's been a rough couple of days for the stock, losing 5.43% over the last week.

4. Susquehanna Bancshares, Inc. (SUSQ): Regional Banks Industry. Market cap of $1.02B. This stock has a potential upside of 33.75%, given its price of $8.09 and target price of $10.82. Dividend yield at 1.02%. TTM payout ratio 22.85% vs. 3-year average payout ratio at 132.69%. TTM operating cash flow/revenue at 69.69% vs. 3-year average at 21.02%. Expected dividend per share $0.07 vs. most recent dividend per share at $0.04. The stock is a short squeeze candidate, with a short float at 10.85% (equivalent to 17.3 days of average volume). The stock has lost 10.41% over the last year.

5. Starwood Hotels & Resorts Worldwide Inc. (HOT):
Lodging Industry. Market cap of $10.22B. This stock has a potential upside of 31.22%, given its price of $51.99 and target price of $68.22. Dividend yield at 0.57%. TTM payout ratio 18.45% vs. 3-year average payout ratio at 50.3%. TTM operating cash flow/revenue at 14.29% vs. 3-year average at 12.07%. Expected dividend per share $0.32 vs. most recent dividend per share at $0.3.

6. Visa, Inc. (V): Business Services Industry. Market cap of $62.12B. This stock has a potential upside of 30.77%, given its price of $74.72 and target price of $97.71. Dividend yield at 0.8%. TTM payout ratio 12.23% vs. 3-year average payout ratio at 14.24%. TTM operating cash flow/revenue at 43.11% vs. 3-year average at 19.73%. Expected dividend per share $0.58 vs. most recent dividend per share at $0.5. The stock has lost 2.28% over the last year.

7. The Scotts Miracle-Gro Co. (SMG):
Agricultural Chemicals Industry. Market cap of $3.20B. This stock has a potential upside of 30.07%, given its price of $48.92 and target price of $63.63. Dividend yield at 2.03%. TTM payout ratio 25.92% vs. 3-year average payout ratio at 30.36%. TTM operating cash flow/revenue at 9.87% vs. 3-year average at 8.49%. Expected dividend per share $1.02 vs. most recent dividend per share at $0.63.

8. Polaris Industries, Inc. (PII):
Recreational Vehicles Industry. Market cap of $3.41B. This stock has a potential upside of 29.88%, given its price of $98.81 and target price of $128.33. Dividend yield at 1.81%. TTM payout ratio 31.91% vs. 3-year average payout ratio at 42.33%. TTM operating cash flow/revenue at 13.78% vs. 3-year average at 11.7%. Expected dividend per share $1.83 vs. most recent dividend per share at $1.6. The stock has gained 66.86% over the last year.

9. KBR, Inc. (KBR): Technical Services Industry. Market cap of $5.36B. This stock has a potential upside of 29.61%, given its price of $34.99 and target price of $45.35. Dividend yield at 0.57%. TTM payout ratio 7.93% vs. 3-year average payout ratio at 10.02%. TTM operating cash flow/revenue at 7.96% vs. 3-year average at 1.91%. Expected dividend per share $0.17 vs. most recent dividend per share at $0.15. The stock has gained 55.02% over the last year.

10. Marriott International, Inc. (MAR): Lodging Industry. Market cap of $12.03B. This stock has a potential upside of 29.31%, given its price of $33.16 and target price of $42.88. Dividend yield at 1.19%. TTM payout ratio 19.71% vs. 3-year average payout ratio at 44.64%. TTM operating cash flow/revenue at 9.54% vs. 3-year average at 7.6%. Expected dividend per share $0.3 vs. most recent dividend per share at $0.21.

11. Nordson Corporation (NDSN):
Diversified Machinery Industry. Market cap of $3.45B. This stock has a potential upside of 29.12%, given its price of $50.11 and target price of $64.7. Dividend yield at 0.83%. TTM payout ratio 12.68% vs. 3-year average payout ratio at 54.55%. TTM operating cash flow/revenue at 20.13% vs. 3-year average at 14.59%. Expected dividend per share $0.44 vs. most recent dividend per share at $0.39. The stock has gained 61.56% over the last year.

12. East West Bancorp, Inc. (EWBC):
Regional Banks Industry. Market cap of $2.77B. This stock has a potential upside of 29.08%, given its price of $18.81 and target price of $24.28. Dividend yield at 1.07%. TTM payout ratio 3.77% vs. 3-year average payout ratio at 33.42%. TTM operating cash flow/revenue at 85.09% vs. 3-year average at 57.88%. Expected dividend per share $0.15 vs. most recent dividend per share at $0.04. The stock has performed poorly over the last month, losing 10.4%.

13. Columbia Banking System Inc. (COLB):
Savings & Loans Industry. Market cap of $668.79M. This stock has a potential upside of 27.91%, given its price of $17.2 and target price of $22.0. Dividend yield at 1.18%. TTM payout ratio 9.63% vs. 3-year average payout ratio at 72.97%. TTM operating cash flow/revenue at 56.05% vs. 3-year average at 37.44%. Expected dividend per share $0.18 vs. most recent dividend per share at $0.04. The stock is a short squeeze candidate, with a short float at 7.94% (equivalent to 17.2 days of average volume). The stock has lost 15.81% over the last year.

14. WSFS Financial Corp. (WSFS): Regional Banks Industry. Market cap of $319.06M. This stock has a potential upside of 27.46%, given its price of $37.76 and target price of $48.13. Dividend yield at 1.29%. TTM payout ratio 26.12% vs. 3-year average payout ratio at 34.68%. TTM operating cash flow/revenue at 42.85% vs. 3-year average at 28.06%. Expected dividend per share $0.49 vs. most recent dividend per share at $0.48. The stock has performed poorly over the last month, losing 11.16%.

15. Weight Watchers International, Inc. (WTW): Personal Services Industry. Market cap of $4.99B. This stock has a potential upside of 18.63%, given its price of $69.46 and target price of $82.4. Dividend yield at 1.02%. TTM payout ratio 23.26% vs. 3-year average payout ratio at 28.01%. TTM operating cash flow/revenue at 25.6% vs. 3-year average at 18.32%. Expected dividend per share $0.73 vs. most recent dividend per share at $0.7. The stock has performed poorly over the last month, losing 17.04%.

*Data sourced from Screener.co and Finviz.

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

Source: 15 Undervalued Dividend-Paying Stocks With Improving Cash Flows