The market is all over the place through midday Friday. It obviously pays to play it safe until we have more certainty around economic growth and the debt markets. One area I am looking at currently midcap stocks that have low valuations and high dividend yields. Here are three worth considering:
Hasbro (HAS) - Hasbro, Inc. engages in the design, manufacture, and marketing of games and toys. The company principally provides children’s and family leisure time and entertainment products and services. It offers various games, including traditional board, card, hand-held electronic, trading card, roleplaying, and DVD games, as well as electronic learning aids and puzzles.
Overview – Hasbro has dropped 25% in price since Mid-May and is now solidly in bargain territory.
- Despite the hard economic times of the last few years, Hasbro has grown earnings at 15% annually over the last five years. It has grown dividends even faster at 18% annually over the last half decade. It yields over 3% at these price levels.
- It sells at around 12 times this year’s earnings and only 10.5 times next year’s consensus EPS.
- Despite the robust earnings and dividend growth of the past five years, HAS has a projected five year PEG of just .8. The market is not giving Hasbro due credit. It is a low beta stock (.9) that raised EPS every year from 2004 through 2010 in a very difficult environment.
- At $37 a share, it is significantly under analysts’ estimates. S&P has a price target of $50 on Hasbro and Jefferies is at $55.
Olin Corporation (OLN) - Olin Corporation engages in the manufacture and sale of chlor alkali products in the United States and internationally. The company operates in two segments, Chlor Alkali Products and Winchester. The Chlor Alkali Products segment manufactures and sells chlorine and caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen, bleach products, and potassium hydroxide. The Winchester segment offers sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
Overview – Like Hasbro, Olin has also dropped approximately 25% in price since its recent highs in May and now looks oversold.
- Olin is selling in the bottom half of its five year valuation ranged based on P/E, P/S and P/B
- Olin offers a robust dividend yield of 4%.
- OLN sells at less than 9 times this year’s earnings and under 8 times next year’s consensus EPS. OLN also has easily beat earnings estimates the last four quarters.
- Olin just won a five year $300mm contract to supply the Army with ammunition and sells at ridiculously low five year expected PEG of .43.
- At 19 and change, Olin is under analysts’ estimates. S&P has a price target of $26 on OLN and UBS is at $23.
Protective Life (PL) - Protective Life Corporation and its subsidiaries engage in the production, distribution, and administration of insurance and investment products in the United States. It operates in five segments: Life Marketing, Acquisitions, Annuities, Stable Value Products, and Asset Protection.
Overview – Protective Life has fallen almost 30% since May and there myriad reasons why its valuation is too low at these levels:
1. It is selling at just over 6 times this year’s projected earnings and less than 6 times 2012’s consensus EPS.
2. It is priced right at long term technical support (See Chart)
3. It provides a generous yield of over 3% and it has raised its dividend payout by over 30% over the past two and a half years.
4. It has a solid risk based capital ratio and an A- rated balance sheet
5. At just over $19 a share, PL is significantly under analysts’ price targets. S&P has a price target of $27 on Protective Life and Bank of America is at $23.