2 Undervalued 3% Yielders With Consistently Growing Earnings

Includes: HRS, OLN
by: Bret Jensen

Some investors prefer stocks that are rapidly growing earnings. Others prefer equities that provide significant dividend income. Every now and again you find stocks that can meet both criteria. Here are two equities with rising earnings and dividends over 3%.

Olin Corporation (NYSE:OLN):

Olin Corporation engages in the manufacture and sale of chlor alkali products in the United States and internationally. It operates through two segments: Chlor Alkali Products and Winchester. The Chlor Alkali Products segment manufactures and sells chlorine and caustic soda, sodium hydrosulfite, hydrochloric acid, hydrogen, bleach products, and potassium hydroxide. The Winchester segment produces and distributes sporting ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.(Business description from Yahoo Finance)

4 reasons Olin is worth more than $20 a share:

  1. The stock is selling for less than 9 times operating cash flow and yields a generous 3.9%.
  2. The company is showing rapid EPS growth. It earned $1.07 per share in FY2010, is projected to make $1.66 in FY2011 and analysts expect $1.94 in earnings in FY2012.
  3. The stock has technical support at 10% under current prices (see chart).
  4. S&P has a “buy” rating and a $26 price target on Olin.

Harris Corporation (NYSE:HRS):

Harris Corporation, together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide. It operates in three segments: RF Communications, Integrated Network Solutions, and Government Communications Systems.(Business description from Yahoo Finance)

4 reasons Harris is undervalued at $37 a share:

  1. Harris sports a 3.1% dividend yield and it grown its payout by 22% on average over the last five years.
  2. The company is showing consistent EPS growth. It made $4.88 per share in FY2011, is expected to make $5.12 in FY2012 and analysts project $5.50 in earnings in FY2013.
  3. Harris has solid technical support at just under current levels (see chart).
  4. HRS is designated a “Strong Buy” at S&P with a $47 price target.

Disclosure: I am long HRS.