5 Excellent Stocks Under $10 Yielding 3% Or More

|
Includes: FTR, HCBK, NOK, SAN, SID
by: Dividend Kings

A common strategy that is used in the markets is to buy strong companies at low prices. The basic idea is that these firms can offer a strategic advantage for growth and will pay compelling dividends. This is when the portfolio can begin to average 7.1% per year (based on the historical mean of these stocks from 1972 to 2010). To see if Nokia (NYSE:NOK), Frontier Communication (NYSE:FTR), Banco Santander (STD), Companhia Siderurgica Nacional (NYSE:SID) and Hudson City Bancorp (NASDAQ:HCBK) fall into this category requires looking at each one individually. This will be accomplished by examining the fundamentals, dividends and the momentum to determine which stock is a buy. Therefore, please use this analysis as a starting point for future research.

Nokia

Nokia has a yield of 9.30% and a forward price earnings ratio of 15.79. The balance sheet includes revenues of $53.27 billion, $14.15 billion in cash and $7.28 billion in debt. In the past year earnings have declined from $.30 to $.04 (see below).

Nokia Earnings per Share

December 2010

March 2011

June 2011

September 2011

Estimate

$.25

$.13

$.03

-$.02

Actual

$.30

$.18

$.09

$.04

Click to enlarge

This has caused the stock to trade in a bearish pattern below the 200 day moving average ($5.44). During this time the volume has been low (which is indicating a lack of buying interest). Recently, management announced a strategy to regain market share but nothing has been formalized. These factors are highlighting how Nokia will more than likely reduce the dividend. This is from the inability of the firm to remain competitive which is hurting the price of the stock (i.e. the earnings per share). The balance sheet can support the company through these kinds of challenges. However, the problem will be redefining the firm in the marketplace. This will take time and can lead to lower profits in the future. As a result, investors should avoid purchasing the stock for price appreciation or the dividend.

Frontier Communications

Frontier Communications yields 14.70% and has a forward price earnings ratio of 19.60. The balance sheet includes $5.32 billion in revenues, $205.82 million in cash and $8.19 billion in debt. During the last 52 weeks the earnings have been flat with variations of $.01 (see below).

Frontier Communications Earnings per Share

December 2010

March 2011

June 2011

September 2011

Estimate

$.10

$.06

$.07

$.06

Actual

$.05

$.06

$.06

$.05

Click to enlarge

This has pushed the share price down with the stock trading off of the annual lows of $4.79 and below the 200 day moving average ($6.58). These are bearish indicators that the price of the stock is in a free fall. This means that the dividend yield will more than likely decline in the future based on the low levels of cash and revenues in comparison with debt. The flat earnings growth and high forward price earnings ratio are an indication that profits have topped out. This means that Frontier Communications should be avoided based on negative momentum and declining fundamentals.

Banco Santander

Banco Santander yields 7.10% and has a forward price earnings ratio of 5.02. The balance sheet includes $8.80 billion in revenues, $8.71 billion in cash and $15.44 billion in debt. During the past year the earnings per share for the company has been declining from$.70 to $.59.

This has caused the stock to set a new annual low of $7.07. This is below the 200 day moving average and it is generally a bearish sign. As a result, investors need to see more stability in the earnings and momentum to be a good buy. This is from the high amounts of debt which could affect liquidity. If this were to happen the dividends could be reduced. Therefore, investors should avoid purchasing shares of Banco Santander until there is more clarity in the earnings.

Companhia Siderurgica Nacional

Companhia Siderurgica Nacional yields 7.0% and has a forward price earnings ratio of 5.02. The balance sheet of the firm includes $8.80 billion in revenues, $8.17 billion in cash and debt of $15.44 billion. Over the past year the earnings per share has been consistent increasing from $.30 to $.77.

Companhia Siderurgica Nacional Earnings per Share

December 2010

March 2011

June 2011

September 2011

Estimate

$.47

$.53

$.73

$.20

Actual

$.30

$.42

$.77

$.77

Click to enlarge

This has helped the stock to establish a double bottom at $7.50 in late December. Since that time the shares have been steadily climbing toward the 200 day moving average of $10.43. This is a bearish indicator that could be in the process of reversing. If this were to happen, there is a realistic possibility of the company reporting higher than expected earnings per share. This is when the markets would realize the low valuation. However, the dividends face the probability of being reduced. This is from the low amounts of cash and revenues in comparison with the outstanding debt. Therefore, investors should be watching the earnings report and how the stock is reacting. This will provide the best insights on future growth and dividends.

Hudson City Bancorp

Hudson City Bancorp yields 4.60% and has a forward price earnings ratio of 10.46. The balance sheet includes revenues of $1.06 billion, $3.26 billion in cash and $20.22 billion in debt. The earnings have been volatile and steadily increasing over the last year (see below).

Hudson City Bancorp Earnings per Share

December 2010

March 2011

June 2011

September 2011

Estimate

$.23

-$1.14

$.19

$.18

Actual

$.25

-$1.13

$.19

$.17

Click to enlarge

This has caused the stock to complete a double bottom pattern of $5.09 in early December. The volume has increased since this time (which is indicating conviction from buyers). This helped the shares to reach the 200 day moving average of $7.01. Despite some positive signs, the stock is in a bear rally. This is based on the close below the 200 day moving average. These factors are showing how investors should be cautious about Hudson City Bancorp. This is from the low amounts of cash and revenues in comparison with the debt. At the same time, the unstable earnings could cause the firm to face a possible liquidity crisis. If this were to occur, the stock will drop fueled by speculation about the quality of earnings. As a result, investors must be wary of profits and dividends in the future. This means that the next several quarters will be critical in determining if the firm has the ability to improve earnings and the balance sheet.

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