The Europe is making its stand to save euro and put an end to all this economic turbulence. But the European banks need a fresh capital of $153 billion at least, which is a significant amount given their liquidity constraints. It is quite challenging to find profitable companies with notable growth at this time, unless you know where to look.
As you know, stocks with healthy performance raise their dividends. But it is the better ones which boost them. I have found four stocks that are boosting- or have recently boosted their dividends by at least 10%. Moreover, they are priced with low P/E ratios, and analysts have positive EPS growth expectations over the next five years. Here, is a fundamental analysis on the four stocks that have boosted dividends (Data from Finviz/ Morningstar, and current as of December 9. You can download you O-Metrix Calculator, here.):
Merck & Co. (MRK)
Merck intends to invest $1.5 billion in China during the next five years. The company has a P/E ratio of 26.2, and a forward P/E ratio of 9.3. Estimated annual EPS growth is 3.4% for the next five years. It sports a juicy dividend of 4.72%, while the profit margin is 8.8%, below the industry average of 15.2%.
Merck kept paying the same dividend since September 2004, but it will increase from $0.38 to $0.42 a share this quarter, or 10.5% in percentage. Revenue and cash flow are healthy. With a Beta value of 0.67, Merck is the sixth least-volatile company in its industry. Debt-to equity ratio (0.3) is also appetizing, which triples the industry average of 0.9. With an AA rated balance sheet, and enough cash to pay out dividends, Merck seems to be a nice bet. Just hold it for now, as the stock is trading next to its 52-week high. Based on these numbers, Merck has an O-Metrix score of 2.28.
Prudential Financial (PRU)
Prudential is planning to buy South Korean company Tong Yang Life Insurance. The company shows a single-digit P/E ratio of 8.1, and a lower forward P/E ratio of 7.4. Five-year annual EPS growth forecast is 9.0%. With a profit margin of 6.9%, shareholders enjoyed a 2.80% dividend last year.
Prudential is a one-shot dividend play, but truly a tough one. The company has boosted its dividend from $1.15 to $1.45 a share this year, equating to 26% in percentage. Revenue, assets and cash flow are healthy. Debt-to equity ratio (0.6) is also good, below the industry average of 0.8. Price-to book value is 0.7, while it has a B Grade O-Metrix score of 7.61. Financials experienced a dip in the recession, and Prudential is no exception. While this turbulent moment may lead to a double-dip, the stock is worth counting on in the long run.
Johnson Controls (JCI)
Johnson Controls declared the completion of its public offering of fixed-rate senior notes, worth $1.1 billion. The Wisconsin-based Johnson is trading at a P/E ratio of 13.8, and a forward P/E ratio of 9.1. Analysts expect the company to have a 16.9% annualized EPS growth in the next five years. Dividend yield is 2.22%, and profit margin is 4.0%.
The company paid a $0.18 dividend per share, which has been paying $0.16. Cash flow, revenue, and assets are increasing. Debt-to equity ratio is 0.4, which crushes the industry average of 4.3. PEG value is 0.5. Johnson Controls already is a leading company among its peers, and it offers stable dividends with moderate growth. Based on these numbers, Johnson has an O-Metrix score of 8.34.
Home Depot (HD)
Home Depot is enjoying the momentum it gained from its Q3 earnings results, which led the stock to hit its 52-week high. The world’s largest home improvement retailer has a P/E ratio of 17.6, and a forward P/E ratio of 14.9. Analysts estimate a 13.3% annual EPS growth for the next five years. It offers a 2.85% dividend, while the profit margin (5.3%) is higher than the industry average of 4.6%.
Home Depot has a C Grade O-Metrix score of 4.96. The company boosted its dividend from $0.25 to $0.29 a share, or 16% in percentage. This is quite an amount for dividend players. Debt-to equity ratio (0.6) is also good, below the industry average of 0.8. With a Beta value of 0.76, the company is the least volatile among its peers. Home Depot beats its biggest rival, Lowe’s (LOW), in most of the vital battlefields. The stock is a high-flyer currently, so jump in after a pullback.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.