We identified five dividend stocks to consider today. Our list includes an oil and gas company, a telecom, a REIT, a communications equipment company and a company from the semiconductor-integrated circuits industry:
BP plc (BP) – BP's stock price fell gradually in the third week of August, from 39.55 to $38 per share recently. Oil, which drives a significant chunk of BP's profits, is priced in U.S. currency and tends to rise as the dollar falls as it makes crude barrels cheaper for investors holding foreign currency. While high oil prices have driven profits for Chevron (CVX) and BP in recent quarters, there is concern that regulatory changes could shrink big oil’s bottom line in the future. That’s why the stock price of BP may see declines in the future as earnings per share will decline. Quite impressively the company’s current price to earnings ratio is 6.0 while the price to earnings ratio of Chevron is 8.45. Profit margin for BP is about 6%. But CVX should be a good choice with its profit margin of 10.61% and earnings per share of around 11 which is $5 more than that of BP stock. Return on equity for both the stock are same, almost 21%. It could be fruitful to purchase BP stock right now, but as stated earlier the stock price decline in the future due to shrinkage of the bottom line for the companies of this industry will minimize the net equity value for investors of the stock.
AT&T, Inc. (T) – T stock is seeing an upward price shift this week. Some landmark events have affected the telecom sector recently. As we know T is trying to acquire T-Mobile (OTC:DTEGY) but the DOJ has sued to block the deal. On the other hand, Google’s (GOOG) acquisition of Motorola Mobility (MMI) is the talk of the industry and some form of deal between Apple (AAPL) and T-Mobile is in the works, following earlier reports that Sprint Nextel (S) will also sell the iPhone 5 when it ships in the fall. So, T and VZ are going to face some real competition very soon. T’s profit margin of 16.24% is quite impressive while Verizon Communications' (VZ) is only 5.91%. T ensured 18.23% of return on equity until now, pre-deal, which is 2% more than that of VZ. The company sports a price to earnings ratio of 8.3. Finally, with earnings per share of 3.44, that is highest among the competitors. Undoubtedly, T has had a strong history of increasing its dividend. Its dividend has doubled in the last 15 years and the current yield is around 5.9%. Hence, AT&T is definitely one stock you should consider for your retirement portfolio.
Chimera Investment Corporation (CIM) – CIM is one of the top 10 stocks in our coverage universe with a dividend yield of 10% or higher. Current dividend yield for this ticker is 16.46% and it has a weekly gain of 0.96%, while PennyMac Mortgage Investment Trust (PMT) has a weekly gain of 7.03%. Interestingly, leveraged mortgage securities were the highest performing high dividend securities (over 10% dividend yield) over the week-long downturn that lasted through August 9, 2011. Though the price to earnings ratio of CIM looks lucrative at 5.15, its price/earnings to growth ratio is 0.39, indicating an undervalued status of this ticker. And a poor price to sales ratio of 4.87 is enough for a rational investor to think once again prior to adding to a portfolio. However, profit margin and return on equity are around 91% and 18% respectively. On the other side, Annaly Capital Management Inc. (NLY) has earnings per share of 2.69 while CIM has only earnings per share of 0.58. Someone reported that CIM has drastically underperformed the S&P over the past six months. Conversely, agency-focused REITs, like Annaly Capital Management Inc. (NLY) and American Capital Agency (AGNC), have significantly outperformed the market over the past few months. Despite the attractive dividend yield investors remain reluctant to invest in CIM as they feel that there are better mortgage REIT investments with stronger risk/reward profiles. For investors looking for non-agency mortgage exposure, we don’t recommend CIM. Rather MFA Financial (MFA) is a good candidate.
Nokia Corporation (NOK) – Just imagine how nervous NOK is. Google (GOOG) has acquired Motorola Mobility and the competition will be something newsworthy. The latest horrifying figure comes from IDC which indicated that Nokia fell to the No. 5 position in Western Europe’s smart phone market in Q2 2011 with market share of 10.8% compared to the No. 1 position that it held one year earlier when it had a market share of 39.5%. Samsung (SSNLF.PK), Apple, HTC and Research In Motion (RIMM) held the top four spots in the race to grab smart phone market share. This is a sharp decline for Nokia and no wonder its stock declined from a peak of $11 to about $6 as of today. But perhaps Nokia will make the turnaround work after all. Management and shareholders certainly have their hopes pinned on Windows Phone 7. However, I believe NOK’s partnership with Microsoft (MSFT) may bring about a turnaround in its fortunes. The NOK stock has profit margin and return on equity of 2.94% and 5.48%, respectively. Unfortunately, NOK stock’s price to sales ratio of 0.36 is worse than Sprint Nextel's 0.29. However, earnings per share of the NOK stock is 0.48 while Sprint has negative earnings per share of -1.05. Hence, we can conclude that NOK is now a better ticker than any other company in the communications equipment industry.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) – Fab-less chip design is the market in which TSM is the leading third-party chip manufacturer. Giants IBM (IBM) and Intel (INTC) return some cash with shareholders. However TSM has the biggest dividend yield among the three at 4.4%. The payout ratio of TSM stock, based on last quarter's profit, is 50%, leaving room for growth as the chip cycle makes its way back up. The company has an operating margin and return on equity of 36% and 30%, respectively. The current price to earnings ratio of 11 is better than that of SMI’s 13.00. But TSM has a very poor price earnings to sales ratio of 4 when industry indicates 1.28, and SMI has 0.92, which is among the best in the semiconductor industry. But in terms of earnings per share, TSM is the leader among the companies of same industry. Earnings per share of TSM is 1.07 while the industry average points at 0.46. Hence, the TSM stock is a good ticker for a good portfolio and it will certainly guide its shareholders in increase of their net equity in the long run.