Jim Cramer's Dividend Picks with Heavy Insider Buying

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Includes: D, EQY, HON, NS, WIN
by: Efsinvestment

Although there was a positive trend on the past few trading days, Cramer still recommended investors stay watchful. He gave names of the five stocks with heavy insider buying that also pay nifty dividends. I have examined these stocks from a fundamental perspective, adding my O-Metrix Grading System where applicable. Here, is a fundamental analysis of these stocks from Cramer's Mad Money (data obtained from Finviz/Morningstar and is current as of August 12):

Stock Name

Ticker

Cramer's Suggestion

O-Metrix Score

My Take

Equity One

EQY

Buy

N/A

Hold

Dominion Resources

D

Buy

2.94

Buy on Dip

NuStar Energy

NS

Buy

2.8

Hold

Windstream

WIN

Buy

2.10

Hold

Honeywell

HON

Buy

7.22

Buy

Click to enlarge

Equity One: Equity One announced strong Q2 results, increasing its revenue by 23.9%, and net income by 53.6% from the same quarter last year. The Florida-based REIT shows a trailing P/E ratio of 23.4, and a forward P/E ratio of 46.3, as of Aug 12. Estimated annual EPS growth for the next five years is -5.0%, which sounds reasonable given the -20.12% EPS growth of the past 5 years. With a profit margin of 25.0%, and a dividend yield of 5.06%, Equity One is a charming stock for dividend lovers. It returned 11.6% in the last twelve months. Gross margin is 72.2%, and operating margin is 33.2%. Target price implies a 9.1% upside movement potential, while the stock is trading 14.16% lower than its 52-week high. The debt-to assets ratio has gone down since 2007. Although P/E and forward P/E ratios and long-term EPS growth estimation do not fit my criteria, I recommend keeping an eye on this stock as it might be healing itself.

Dominion Resources: Dominion will yield a $0.492 dividend on Sept. 20. As of Friday’s close, Dominion was trading at a P/E ratio of 16.34, and a forward P/E ratio of 14.63. Analysts expect the company to have a 5.0% annualized EPS growth in the next five years, which sounds conservative given its 27.34% EPS growth of the last five years. Profit margin in 2010 was 11.2%, while it offered a 4.13% dividend. O-Metrix score of the company is 2.94. Dominion returned 8.6% in a year, whereas it is currently trading 5.43% lower than its 52-week high. Target price is $47.06, which indicates an about 1.4% downside potential. Assets are increasing for the last four years. Institutions own 58.60% of the stock, and earnings increased by 136.41% this year. Yields are great. $1000 invested in Dominion in 1995 would be about $8300 now. A pullback will create the proper environment for entry.

NuStar Energy: The company's Chairman of the Board bought $659.000 worth of stock recently. The Texas-based oil transporter, as of Aug 12, has a P/E ratio of 18.86, and a forward P/E ratio of 17.2. Analysts estimate a 1.9% annual EPS growth for the next five years, which is reasonable when its 2.89% EPS growth of past 5 years is considered. Profit margin (4.7%) is above the industry average of 4.1%, and dividend yield is outstanding (7.44%). Target price is $66.50, implying a 12.9% upside potential. The stock is trading 14.02% lower than its 52-week high, while it returned 1.5% in a year. Debts are increasing, as well as assets. Yields are all right. Debt-to equity ratio is 0.8, far better than the industry average of 3.5. This stock is a superb pick for investors looking for dividend income, but I am not sure about capital appreciation.

Windstream Corp: Windstream recently announced its quarterly results. The company was trading at a P/E ratio of 21.5, and a forward P/E ratio of 13.8, as of the Friday close. Five-year annualized growth forecast is -1.0%. Although profit margin is relatively thin (6.9%), dividend yield is magnificent (8.42%). Target price indicates an about 21.0% increase potential, while the stock is trading 12.77% lower than its 52-week high. Gross margin and operating margin are 61.9% and 27.4%, respectively. ROE is 43.07%. Windstream returned 4.7% in the last twelve months, whereas debt-to assets ratio is hovering around alarming rates. P/B and P/S ratios are both above their industry averages. 10 out of 17 analysts recommend holding. Debt-to equity ratio is 9.0, well above the industry average of 3.3. SMA50 and SMA200 are -5.50% and -5.79%, respectively. Moreover, the company has a poor O-Metrix score of 2.10. Keep if you own it, but do not buy.

Honeywell: Honeywell is one of Cramer’s favorites. As of the Aug 12 close, the aerospace company shows a trailing P/E ratio of 14.8, and a forward P/E ratio of 10.30. Analysts expect the company to have 15.3% annualized EPS growth in the next five years. Profit margin in 2010 was 7.0%, while shareholders enjoyed a 2.84% dividend. Earnings increased by 41.10% this quarter, and 26.41% this year. The company has an impressive O-Metrix score of 7.22. Target price indicates a 44.2% upside movement potential, while the stock is trading 24.30% lower than its 52-week high. Honeywell returned 13.4% in the last twelve months, and debt-to assets ratio is going down since 2008. Yields seem all right. Debt-to equity ratio is 0.6, better than the industry average of 2.2. Average analyst recommendation is 1.4 for Honeywell (1=Buy, 3=Sell). I would not ignore this company. It is a cheap stock with high growth potential.

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