Here are four undervalued stocks you should consider for your portfolio. In times of uncertainty, we can rest assured that our dividends will cushion against a downturn.
Pfizer Inc (PFE) has made three dividend payments during the year, the last being on Aug 3, 2011. The stock's dividend yield is 4.39% which is in line with peers like Merck (MRK). Interestingly, 71% of the shares are held by institutional investors. Recently the company was granted U.S. approval to sell a drug used in the treatment of lung cancer caused by a gene defect.
The good news was made public at the end of August. The twice-a-day pill will be called Xalkori. The drug has been proven to reduced the size of a tumor in 57% of patients and stopped the progression of the cancer in 87% of patients. Four analysts surveyed by Bloomberg say this new treatment could give rise to sales of $540 million by the end of 2015, which would help Pfizer make back revenue from other patent losses.
The company's P/E is 17.02 and EPS is 1.07. The book value and price/book ratio are 11.34 and 1.61. At a price of around $18 a share, I rate Pfizer a buy.
Intel Corporation (INTC) produces semiconductor chips. In my research for this article I learned that 3.87% of Intel shares are held by ETFs. INTC has consistently paid share holders a dividend and the current dividend yield is 4.25%. Price to earnings is 9.07 and EPS is 2.18. The book value per share is 9.21 and price/book value is 2.18. The net profit margin is 25.29%.
Comparing INTC with Advanced Micro Devices (AMD) we can see that the operating margin is very impressive for INTC and much better than that of AMD which is 33.55% and 6.54%. INTC trades at a 37% discount to peers in terms of price earnings and a discount around 20% to competitor AMD in terms of price book ratio. The kicker? Intel has a much lower debt load on its balance sheet. I rate Intel as a buy.
Huntington Bancshares Inc. (HBAN) is a financial holding company. The dividend yield is 3.27% and EPS is $0.45. Present book value and price/book value are $6.08 and 0.81, respectively, indicating the shares are trading below book value. Major competitors Fifth Third Bancorp (FITB) and JPMorgan Chase & Co. (JPM) give dividend yields of 2.39% and 2.76%, respectively.
For income seekers, HBAN provides a higher yield. HBAN's second quarter in 2011 brought earnings of $0.16 per share. Results also compare favorably with $0.14 per share earned in the prior quarter and $0.03 a year ago. The results were better than expected and reflect a significant improvement in credit quality with a drop in loan loss provisions.
Huntington declared an increase in its dividend to 0.04 per share from $0.01 paid in the prior quarter. I rate HBAN a buy.
General Electric (GE) reported a strong second-quarter for 2011, with operating earnings of $3.7 billion, up 18% or $0.34 per share compared to the second quarter of 2010. The current P/E ratio is 12.44 and the quarterly earning per share quarter is 11.44%. The dividend yield is 3.80%. Book value per share is $12.08 and price/book value is 1.29 which looks promising for this big player.
What seems particularly promising for GE is that equipment orders increased by 20% and service orders were up 5% recently. Orders in energy infrastructure products advanced 4%. As well, GE Capital's performance was particularly noteworthy, as their credit losses continued to decline. I rate GE as a buy.