Stocks trading with favorable valuations are always a good bet to outperform the market, as many value fund managers over the decades have shown us. Below are companies that have proven themselves over the past decades with consistent, earnings, revenue, and dividend growth.
McDonald’s Corporation (MCD) together with its subsidiaries, operates as a foodservice retailer worldwide. This premier restaurant has a consistently growing 2.9% dividend yield making it a great long-term holding. Moreover, it's trading at a reasonable trailing 19x P/E, forward 18x P/E, has fantastic ROA and ROE of 16% and 40% respectively, and strong FCF in excess of $4B this past year.
General Electric Company (GE) operates as a technology, service, and finance company worldwide. GE is an attractive stock at a trailing 13x P/E, 11x forward P/E, .9x PEG, 1.1x P/S, very strong FCF of over $26B this past year, and very nice 3.5% dividend yield. Moreover, with a very low payout ratio below 50%, expect more dividend raises in the future. This is a buy.
Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company trades at just under 15x trailing P/E, 11x forward P/E, .6x PEG, 1.1x P/S, approximately $2.5B in FCF, and nearly 2 % dividend yield. CAT trades at a very low 27% payout ratio, so it's very likely to see continued future dividend increases. I think CAT is a buy here.
Honeywell International (HON) operates as a diversified technology and manufacturing company worldwide. The company trades at just over 15x trailing P/E, 12x forward P/E, .8x PEG, 1.1x P/S, over $3.5B in FCF, and respectable 2.7% dividend yield. HON trades at a very low 34% payout ratio, so it's very likely to see continued future dividend increases. I think HON is a buy here.
Altria Group, Inc. (MO) through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. The company has a trailing P/E under 17x, forward 13x P/E, 1.7x PEG and 3.5 P/S, FCF in excess of $2.5B this past year, and nice 5.8% dividend yield. A word of caution is MO trades at a payout ratio above 90%, but it has a great dividend track record.
Freeport-McMoRan Copper & Gold Inc. (FCX) engages in the exploration, mining, and production of mineral resources. This American based firm gives us some nice international exposure while trading at attractive valuations of a trailing 7x P/E, 8.5x forward P/E, 1.2x PEG, 1.7x P/S and 1.8x EV/S, approximately $5B in FCF this past year, and 2.5% dividend yield. FCX had a payout ratio of 55% as well, so dividend raises in the near future are certainly likely and have me saying FCX is a buy.
The Procter & Gamble Company (PG), provides consumer packaged goods in the United States and internationally. At 16.5x trailing P/E, 14x forward P/E, 1.8x PEG, 2.1x P/S and 2.5 EV/S, over $10B in FCF this past year, and 3.2% dividend yield. PG still has a low 51% payout ratio, so expect the dividend to not only be safe, but raised in the near future-- making this a buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.