With yield getting harder and harder to find in this market where 10-year Treasuries go for 2.2%, the pullback of the last two months has provided a good long-term opportunity to pick up bargains that provide outsized dividends. Here are three stocks with yields considerably over what you can get in Treasuries that are at reasonable valuations and have decent growth prospects.
Novartis (NVS) – “Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide”. (Business description from Yahoo Finance).
(Click charts to enlarge)
5 reasons NVS’ valuation is compelling at $56 a share
- It has good technical support in the $52 to $55 range (See Chart)
- It yields 3.5% and has raised its dividend on average 15% annually over the last five years. It also has an AA- rated balance sheet
- NVS is selling near the bottom of its five-year valuation range based on P/E, P/S, P/B and P/CF.
- It is priced at just 10 times this year’s expected earnings. Novartis has also beaten estimates handily three of the last four quarters and consensus estimates for 2011, and 2012, have risen over the past three months.
- S&P has a $72 price target on Novartis and the median analyst estimate is $68.50.
Nucor Corporation (NUE) – “Nucor Corporation, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces hot and cold-rolled sheet steel; plate steel; structural steel comprising wide-flange beams, beam blanks, and sheet piling; and bar steel, such as blooms, billets, concrete reinforcing bar, merchant bar, and special bar quality products. The Steel Products segment offers steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh products”. (Business description from Yahoo Finance).
5 reasons to see value in Nucor at $32 a share.
- After falling 30% from its highs earlier in the year, NUE is selling at just under 12.5 times 2011’s expected EPS and less than 9 times 2012’s consensus earnings.
- It yields a robust 4.3% and with strong operating cash flow and an A rated balance sheet, seems to be in a good position to continue to raise the dividend payout in the future.
- NUE is selling near the bottom of its five-year valuation range based on P/S, P/B and P/CF.
- Nucor is building a 5.5mm ton facility in Louisiana, that has the potential to reduce its overall costs by .60 to $1.20 a share when it comes online.
- It is significantly under analysts’ price target. Credit Suisse has a $49 price target on NUE and S&P is at $50.
Intel Corporation (INTC) – “Intel Corporation engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. It offers microprocessor products used in notebooks, netbooks, desktops, servers, workstations, storage products, embedded applications, communications products, consumer electronics devices, and handhelds”. (Business description from Yahoo Finance).
5 reasons Intel has significant value at just over $19 a share
- Intel has good technical support at these levels (See Chart)
- INTC is selling at the very bottom of its five-year valuation range based on P/E, P/S, P/B and P/CF.
- It has raised its payout over 12% a year on average over last five years and now yields a very generous 4.2%
- Intel has easily beat earnings estimates each of the last four quarters and sells at less than 9 times this year’s expected earnings. It also has a pristine A+ rated balance sheet with $2 a share in net cash.
- Credit Suisse has an “outperform” rating and a $28 price target on Intel. The median analyst price target on INTC is currently $26 or 30% above current price levels.