5 High Yield Stocks For The Ultimate Retirement Portfolio

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 |  Includes: CAT, CNH, COP, CVX, MMM, ORAN, OXY, UTX, VOD, XOM
by: Investment Underground

By Daniel Carver

Today I want to analyze five stocks that I feel are ideally suited for the ultimate retirement portfolio. We’ll be paying special attention to their dividend yields and the prospects for that yield to continue unchanged, to rise or to fall. We’ll also match up these picks to a competitor, assuring a balanced view. I will be analyzing these companies from the vantage point of a value investor.

Caterpillar, Inc. (NYSE:CAT) and CNH Global N.V. (NYSE:CNH) are both in the farm and construction machinery industry. Their market caps are $64.64 and $9.9 billion, respectively. Caterpillar’s been in business continuously since 1925 and CNH Global since 1991. Both businesses are cyclical and their fortunes rise and fall with the GDP, but remember; we are looking at long term investment. Think retirement portfolio! The clear choice in this round is Caterpillar whose dividend yield will help smooth out the rough spots. CNH Global doesn’t offer a dividend nor does it offer the track record enjoyed by Caterpillar.

Caterpillar, Inc.

CNH Global N.V.

Fundamentals

Value

Fundamentals

Value

Price/Earnings Ratio

14.84

Price/Earnings Ratio

10.24

Price/Earnings Growth Ratio

0.61

Price/Earnings Growth Ratio

0.72

Price to Book

4.43

Price to Book

1.24

Return on Equity

35.21

V

Return on Equity

12.53

Quarterly Revenue Growth (yoy)

41.20

E

Quarterly Revenue Growth (yoy)

28.10

Quarterly Earnings Growth (yoy)

44.10

R

Quarterly Earnings Growth (yoy)

230.10

Total Debt/Equity (mrq)

233.25

S

Total Debt/Equity (mrq)

205.16

Current Ratio

1.46

U

Current Ratio

1.80

Dividend

S

Dividend

Dividend Yield

1.80

Dividend Yield

0.00

Payout Ratio

27.00

Payout Ratio

0.00

Technical

Technical

Net Earnings Per Employee

35,799

Net Earnings Per Employee

33,160

Click to enlarge

3M Company (NYSE:MMM) and United Technologies Corporation (NYSE:UTX) are both conglomerates with market caps of $59.08 and $68.89 billion, respectively. The firms are closely matched across the board. The quarterly year-over-year negative that 3M sports is a bit deceiving and more a matter of timing than any real red flag. If one compares the two companies’ income statements, 3M had a positive percentage change in earnings of 27.94% from 2009 to 2010. United Technologies only saw a 14.21% increase from 2009 to 2010. Although 3M’s dividend yield is not huge, it is better than nothing, which is what United Technologies offers. That said, my choice is MMM.

3M Company

United Technologies Corporation

Fundamentals

Value

Fundamentals

Value

Price/Earnings Ratio

14.27

Price/Earnings Ratio

13.9

Price/Earnings Growth Ratio

1.28

Price/Earnings Growth Ratio

1.21

Price to Book

3.46

Price to Book

2.97

Return on Equity

26.03

V

Return on Equity

22.39

Quarterly Revenue Growth (yoy)

9.60

E

Quarterly Revenue Growth (yoy)

8.70

Quarterly Earnings Growth (yoy)

(1.60)

R

Quarterly Earnings Growth (yoy)

10.50

Total Debt/Equity (mrq)

35.37

S

Total Debt/Equity (mrq)

47.52

Current Ratio

2.22

U

Current Ratio

1.32

Dividend

S

Dividend

Dividend Yield

2.60

Dividend Yield

2.50

Payout Ratio

37.00

Payout Ratio

34.00

Technical

Technical

Net Earnings Per Employee

53,212

Net Earnings Per Employee

23,295

Click to enlarge

France Telecom S.A. (FTE) and Vodafone Group plc (NASDAQ:VOD) are both foreign companies in the telecom services industry. Their market caps are $40.27 and $142.20 billion, respectively. As the table shows, Vodafone has a better outlook for growth, better revenue growth, better earnings growth (especially if you look at the income statements), better debt/equity ratio and a superior current ratio. The dividend yield for VOD is just over half that of France Telecom, but I think it is sustainable and highly doubt that France Telecom’s is. Look at France Telecom’s debt/equity ratio! My choice in this match-up has to be Vodafone.

French Telecom S.A.

Vodafone Group plc

Fundamentals

Value

Fundamentals

Value

Price/Earnings Ratio

10.14

Price/Earnings Ratio

13.11

Price/Earnings Growth Ratio

8.78

Price/Earnings Growth Ratio

1.22

Price to Book

1.11

Price to Book

1.09

Return on Equity

9.72

V

Return on Equity

7.97

Quarterly Revenue Growth (yoy)

1.90

E

Quarterly Revenue Growth (yoy)

4.10

Quarterly Earnings Growth (yoy)

(47.80)

R

Quarterly Earnings Growth (yoy)

(11.40)

Total Debt/Equity (mrq)

122.95

S

Total Debt/Equity (mrq)

42.35

Current Ratio

0.61

U

Current Ratio

0.99

Dividend

S

Dividend

Dividend Yield

13.50

Dividend Yield

7.60

Payout Ratio

61.00

Payout Ratio

54.00

Technical

Technical

Net Earnings Per Employee

23,808

Net Earnings Per Employee

130,691

Click to enlarge

Chevron Corporation (NYSE:CVX) and Occidental Petroleum Corporation (NYSE:OXY) are both in the major integrated oil and gas industry. Market caps are $217.19 and $79.46 billion, respectively. Frankly, either of these companies would be a good choice but- this is a contest and so a victor must be chosen. I have to score Chevron highest as the fundamentals largely favor Chevron. The dividend is superior and sustainable. I also like the fact that Chevron’s return on equity is significantly better than Occidental’s as is the debt/equity ratio. Winner…Chevron.

Chevron Corporation

Occidental Petroleum Corporation

Fundamentals

Value

Fundamentals

Value

Price/Earnings Ratio

8.11

Price/Earnings Ratio

12.42

Price/Earnings Growth Ratio

1.07

Price/Earnings Growth Ratio

0.7

Price to Book

1.8

Price to Book

2.16

Return on Equity

24.2

V

Return on Equity

18.16

Quarterly Revenue Growth (yoy)

26.20

E

Quarterly Revenue Growth (yoy)

26.10

Quarterly Earnings Growth (yoy)

107.80

R

Quarterly Earnings Growth (yoy)

48.70

Total Debt/Equity (mrq)

8.01

S

Total Debt/Equity (mrq)

16.09

Current Ratio

1.64

U

Current Ratio

1.62

Dividend

S

Dividend

Dividend Yield

2.80

Dividend Yield

1.90

Payout Ratio

22.00

Payout Ratio

23.00

Technical

Technical

Net Earnings Per Employee

436,613

Net Earnings Per Employee

561,818

Click to enlarge

Exxon Mobil Corporation (NYSE:XOM) and ConocoPhillips (NYSE:COP) are both in the major integrated oil and gas industry and each are large caps, although Exxon is four times the size of ConocoPhillips in terms of market cap, standing at $410.87 billion. Both firms are well established, with Exxon’s founding dating back to 1870 and Conoco’s to 1917. We recently noted the theft of Exxon's investment in Venezuela, and the fact that the Chavez administration would not recognize the recent World Bank Ruling. This could affect other oil companies as well.

The significant differences in the companies emerge in terms of year-over year earnings growth which clearly favors Exxon. Also favoring Exxon in a substantial way is the debt/equity ratio which is about four times better than Conoco’s. Exxon has a nice dividend yield and while I readily concede that it is 140 basis points lower than Conoco’s, it has a relatively certain future. Conoco’s plan to spin off its marketing and refining business may or may not have a negative impact on the dividend yield. One could argue that there might be other ‘door prizes’ associated with the spin off that might outweigh any dividend downsizing. It is at best a crapshoot and we don’t want that in our retirement portfolio. All things considered, I have to anoint Exxon the winner in this match-up. Earnings, management competency and a sustainable dividend as evidenced by quarterly year-over-year earnings growth, return on equity, earnings per employee, debt/equity and a low payout ratio, combine favorably in comparison to Conoco.

Exxon Mobil Corporation

ConocoPhillips

Fundamentals

Value

Fundamentals

Value

Price/Earnings Ratio

10.32

Price/Earnings Ratio

9.36

Price/Earnings Growth Ratio

1.14

Price/Earnings Growth Ratio

1.53

Price to Book

2.63

Price to Book

1.47

Return on Equity

26.85

V

Return on Equity

18.36

Quarterly Revenue Growth (yoy)

31.50

E

Quarterly Revenue Growth (yoy)

35.70

Quarterly Earnings Growth (yoy)

40.50

R

Quarterly Earnings Growth (yoy)

(14.40)

Total Debt/Equity (mrq)

10.33

S

Total Debt/Equity (mrq)

41.68

Current Ratio

0.93

U

Current Ratio

1.12

Dividend

S

Dividend

Dividend Yield

2.20

Dividend Yield

3.60

Payout Ratio

22.00

Payout Ratio

32.00

Technical

Technical

Net Earnings Per Employee

489,354

Net Earnings Per Employee

373,401

Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.