This is the second article in a series of three articles that review UBS's report titled "Profit Outlook 2012, a Pivotal Election Year" released on December 1, 2011. The report identifies 'dividend fountains' i.e. stocks that have over 2.5% dividend yield and a dividend growth of over 5%, and are expected to outperform the market.
Intel Corp. (INTC) has a Buy rating by UBS. The company has an indicated yield of 3.5% (annualized quarterly dividend) and the full year's dividend payout ratio is expected to be 31.2%. Intel designs and manufactures integrated circuits and microprocessor products used in the manufacture of computing devices. The company is in the process of marketing "Ultrabooks". A stock beta of 0.95 indicates a risk profile comparable to that of the market; however, the company's return last year was 23%, 20 percentage points higher than the S&P 500 index. It is trading at a forward price to earnings ratio of 10.7x.
Kraft Foods Inc. (KFT) has a Buy rating by UBS. It has an indicated yield of 3.3%. Kraft is a world renowned brand for packaged foods and its primary products include Cadbury, Oreo, Maxwell, Trident gum and Kraft branded cheeses and sauces. The stock is up 21% in the last 12 months and its beta, 0.49, shows relative stability. The company is trading at a forward price to earnings ratio of 15x and according to UBS's estimates, 2011's dividend payout ratio is expected to be 51%. Warren Buffett had a $3 billion stake in the company at the end of the third quarter.
Mattel Inc. (MAT) has an indicated yield of 3.3%. The company has a Buy rating by UBS. The company's 2011 dividend payout ratio is expected to be 41%. Mattel is manufacturing Barbie and other famous dolls and accessories like Disney Classics, Toy Story, WWE Wrestling, and Batman. The company's revenues continue to grow steadily, showing a year-on-year growth of 9% in the last quarter. It also has a healthy balance sheet with a current ratio of over 2x and a debt to equity ratio of less than 50%. The stock is trading at a forward price to earnings ratio of 12x.
Wisconsin Energy Corp. (WEC) has a Buy rating by UBS. The company has an indicated yield of 3.3%, and its forward price to earnings ratio is 15x. The stock has very low volatility with a beta of 0.26, and returned 19% to its equity investors last year. Wisconsin Energy is involved in the generation and distribution of electricity and serves over a million customers. Despite a quarterly revenue growth of 8%, its earnings were up 16% in the quarter mainly on account of 12% profit margins.
Foot Locker Inc (FL) has a Neutral rating by UBS. The company has an indicated yield of 3.2%. Its expected full year's dividend payout ratio is 54%. Foot Locker is a retailer of athletic footwear and apparel with over 3,400 stores in the United States, Europe and Australia. The stock increased by 30% in the last twelve months. A 9% year-on-year increase in quarterly revenues and a 27% increase in earnings suggest that the company is doing well.
Eaton Corp. (ETN) also has a Neutral rating by UBS. The stock has an indicated yield of 3.1%. The company's 2011 dividend payout ratio is expected to be 34%. Eaton is an international power management company which provides electrical components to various industries. The company is financially healthy and showed a 16% year-on-year growth in its quarterly revenues, while earnings increased by 36%. The stock is trading at a forward price to earnings ratio of 10x.
Brinker International Inc. (EAT) has an indicated yield of 3%. The company has a Buy rating by UBS. Brinker operates over 1,500 restaurants and has presence in over 30 countries covering United States, Middle East, Asia and European regions. The stock price is up 21.6% in the last twelve months, outperforming the broader S&P Index by nearly 20 percentage points. With a 28% return on equity, Brinker is expected to have a dividend payout ratio of 46%.
Chevron Corp. (CVX) has an indicated yield of 3%. The company's 2011 dividend payout ratio is expected to be 22% and it has a Buy rating by UBS. Chevron engages in exploration and production of crude oil and refining crude into petroleum products which are then marketed worldwide. Chevron is up 20% in the last twelve months backed by an impressive quarterly earnings growth of 108% year-on-year. The company has a stable balance sheet, a huge asset base, and market cap of over $200 billion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.