8 Cheap, Safe Dividend Stocks Now On Sale

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 |  Includes: ACI, CCL, CVC, HAS, LO, OZM, RRD, RSG
by: Insider Monkey

Defensive investors like stocks with sustainable high dividend yields. Dividend stocks can protect investors from potential inflation and stocks with sustainable high dividend yields will enable investors to achieve their target returns over long periods of time. Though dividend stocks historically outperformed the market, some of them did not perform well over the past few months. The market was up 9.46% over the past three months, but some safe dividend stocks suffered losses in that period. It is very likely they are currently trading at a discount and have great potential to grow in the future.

Below we compiled a list of safe dividend stocks now on sale. All companies have at least $2 billion market cap, dividend yields of over 3%, EPS growth rate higher than 10% per year over the past five years and lost at least 1% over the past three months.

Ticker

Company

Dividend Yield

EPS growth

Return

RRD

R.R. Donnelley

8.79%

11.00%

-20.60%

CVC

Cablevision Systems

4.36%

16.38%

-19.35%

ACI

Arch Coal Inc.

3.19%

32.96%

-14.33%

CCL

Carnival Corporation

3.27%

12.03%

-7.34%

HAS

Hasbro Inc.

3.63%

11.35%

-4.75%

OZM

Och-Ziff Capital Mgt

11.29%

12.10%

-2.77%

RSG

Republic Services, Inc.

3.18%

14.15%

-2.43%

LO

Lorillard, Inc.

4.60%

10.10%

-1.93%

Click to enlarge


R.R. Donnelley & Sons Company (NASDAQ:RRD)
suffered the biggest loss over the past three months. It was down 20.60%, underperforming the market by about 30 percentage points. RRD has a high dividend yield of 8.79% and its EPS is expected to grow at an 11% per year rate over the next five years. It has a market cap of $2.2B and a relatively low P/E ratio of 10.03, indicating some form of perceived value of the stock. RR Donnelley provides integrated communications globally. At the end of September last year, there are 13 hedge funds with RRD positions. For example, Larry Robbins' Glenview Capital had $40 million invested in RRD.

Another large-cap dividend stock on sale is Lorillard Inc (NYSE:LO). It lost 1.93% over the past three months, underperforming the market by 11 percentage points. Lorillard has a market cap of $15.3B and a P/E ratio of 15.21. It has a dividend yield of 4.6% and its EPS is expected to grow at 10.10% annually in the next five years. Lorillard is the manufacturer of cigarettes in US. The company reported revenue of $1.62 billion for the third quarter of 2011, up from $1.57 billion for the same quarter a year earlier. At the end of September, there are 23 hedge funds reported to own LO. For example, Jim Simons' Renaissance Technologies boosted its Lorillard stakes by 2% over the third quarter. As of September 30, 2011, the fund had $324 million invested in the stock.

Carnival Corporation (NYSE:CCL) also suffered losses over the past three months. It was down 7.34% during that period, underperforming the market by 17 percentage points. The cruise company reported total revenue of $3.7 billion for the three months ending November 30, 2011, up from $3.5 billion for the same period in 2010. There are 19 hedge funds with CCL positions and the end of the third quarter. For instance, John W. Rogers' Ariel Investments had $54 million invested in CCL. The stock has a dividend yield of 3.27% and its EPS is expected to grow at 12.03% per year over the next five years. It has a market cap of $24B and a relatively low P/E ratio of 12.62.

Other cheap safe dividend stocks on sale include Cablevision Systems Corporation (NYSE:CVC), Arch Coal Inc (NYSE:ACI), Hasbro Inc (NASDAQ:HAS), Och-Ziff Capital Management Group LLC (NYSE:OZM), and Republic Services Inc (NYSE:RSG). The forward P/E ratios of all eight stocks listed above are lower than 15, indicating that these stocks are very likely to be undervalued by the market currently. Additionally, the consistent fat dividends they pay enable them to deliver decent returns to investors. We are concerned about the Fed's inflationary monetary policy and we think dividend stocks are better investments than fixed income securities over the next few years. We strongly encourage investors to do some deep research on these eight cheap safe dividend stocks for their own portfolios.

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