By Kenn Mangum
What does a retail bank, an exchange traded fund, a REIT, a maker of document equipment and a cell phone manufacturer have in common? They are all stocks trading under $10. Let's look at these 5 stocks to see if they have a place in your portfolio:
KeyCorp (KEY): Shares are trading around $8.20 at the time of writing, in the middle of their 52-week trading range of $5.59 to $9.77. At the current market price, the company is capitalized at $7.83 billion. Earnings per share for the last year were $0.98, and it paid a dividend of $0.12, yielding 1.50%.
KeyCorp has been on the rise after announcing the purchase of 37 retail branches from HSBC Bank USA N.A. (HBC) in a $110 million deal that will bring an additional $2.4 billion in deposits to the firm. The deal is expected to close by June 30th and is to include the 26 offices First Niagara (FNFG) was ordered to divest under its November 2011 agreement with the U.S. Department of Justice. The deal is also expected to increase employee headcount for KeyCorp by 250 persons.
Since hitting a 52 week low on October 3rd KeyCorp has rebounded 47% but is still well below the average industry market capitalization of $28.4 billion. With this strong price growth KeyCorp's trailing price to earnings ratio of 7.98 and price to free cash-flow of 3.41 are below U.S. Bancorp (USC) at 10.89 P/E and 5.28 P/FCF. Pick up KeyCorp.
Gabelli Equity Trust (GAB): Shares are trading around $5.20 at the time of writing, in the middle of their 52-week trading range of $4.26 to $6.55. At the current market price, the company is capitalized at $945.91 billion. Earnings per share for the last year were $0.68.
The fund has reaffirmed its 10% distribution policy and declared a $0.16 per share dividend to end Q4 2011 with a yield of 12.4%. This is below the Alpine Total Dynamic Dividend Fund (AOD) dividend yield of 14.6%. This yield is based on net asset value and should not be considered a pure reflection of performance but rather a commitment to shareholder dividend distribution. That said the P/B ratio of GAB is at 0.84 compared to Adams Express Company (ADX) at 0.79 and Tri-Continental Corporation (TY) at 0.83. I recommend GAB as a great stock to keep track of for lower priced entry point.
ARMOUR Residential REIT (ARR): Shares are trading around $7.10 at the time of writing, in the middle of their 52-week trading range of $5.40 to $8.05. At the current market price, the company is capitalized at $598.45 million. Earnings per share for the last year were -$0.61, and it paid a dividend of $1.32, yielding 18.30%.
ARMOUR has recently announced a public offering of 9 million shares to fund additional financial assets. This is also part of its Dividend Reinvestment and Share Purchase Plan that allows shareholders to reinvest dividends into the company and purchase additional shares directly from the company. The transaction is being underwritten by Deutsche Bank AG (DB) who has a 30 day option to purchase an additional 1.35 million shares.
Although Q4 2011 net income was negative, due to an unrealized loss on derivatives, ARMOUR has a favorable forward looking price earnings ratio of 5.65 compared to 8.12 for Capstead Mortgage (CMO) and 7.12% for Annaly Capital Management (NLY), which carry their own risks as we outlined recently. In addition, investors should opt for ARMOUR's encouraging dividend yield of 18.7% compared to 13.6% for Capstead and 13.93% for Annaly.
Xerox Corporation (XRX): Shares are trading around $8.10 at the time of writing, in the middle of their 52-week trading range of $6.55 to $11.73. At the current market price, the company is capitalized at $11.28 billion. Earnings per share for the last year were $0.74, and it paid a dividend of $0.17, yielding 2.10%.
Xerox was recently downgraded by Barclays PLC (BCS) from Overweight to Equal Weight. Expect this to put some strain on their heavily leveraged capital overheads. Over the past few years Xerox has relied heavily on bundled lease agreements which provide a large and stable revenue stream but little bottom-line growth. Expect these growth issues to continue as the current return on assets is 3.22% compared to 5.57% at Hewlett-Packard Company (HPQ). Xerox could be considered a potential acquisition target as it is trading 14% below book value whereas peers HPQ and Canon (CAJ) are trading at 1.39 and 1.56 price to book respectively. In addition investors would likely prefer HPQ's price to earnings of 8.24 to Xerox 10.99.
Nokia Corporation (NOK): Shares are trading around $5.30 at the time of writing, in the middle of their 52-week trading range of $4.46 to $11.75. At the current market price, the company is capitalized at $19.70 billion. Earnings per share for the last year were $0.23, and it paid a dividend of $0.48, yielding 9.20%.
Nokia is struggling to remain viable in the American market facing competition with the sharks in the market, like the Google Android and the Apple iPhone. The potential for Nokia to enter the high-growth tablet market is likely high as it must do something to turn around year-over-year revenue growth of -12.6% when the industry had a favorable increase of 11.3%. A better investment alternative might be LM Ericsson Telephone (ERIC) that has better net profit margin of 6.84% to Nokia's 0.8%, and a forward price to earnings ratio of 10.44 to Nokia's 15.17.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.