Considering the importance of dividend stocks, due to the low interest rate environment, I have identified and analyzed five dividend payers that I believe will outperform in 2012. They have high payout ratios along with sufficient free cash flow to continue paying dividends in the coming quarters.
Capital One Financial Corporation (COF) is a bank holding company for Capital One Bank. Shares of the company are currently trading at $46. Over the last 52 weeks, its shares have traded between $35.94 and $56.26. The company reported a dividend yield of 0.4%. Capital One has generated a profit margin of 24.8% and a return-on-equity of 12.8%.
The Bank of America (BAC) is a competitor of Capital One. When a comparison was drawn, in terms of operating margin, Capital One reported a value of 37%, which was higher than Bank of America's value of 4.5%. Moreover, Capital One's price-to-equity ratio of 6 times was lower than the industry average of 10.7. Capital One is currently considering buying HSBC's U.S. credit card portfolio. This move will not only contribute $2.4 billion to the company, but is also expected to improve investor confidence, amidst its most recent performance. Operating cash flow in the last full fiscal year is $8.2 billion.
Wells Fargo & Company (WFC) engages in the provision of banking services mostly in the United States. Shares of the company are currently trading at $30.5. Over the last 52 weeks, its shares have traded between $22.58 and $34.25. Wells Fargo has a dividend yield of 1.6% and it has generated a profit margin of around 22%.
Wells Fargo reported an operating margin of 36.7% while Citigroup Inc. (C), a competitor, reported an operating margin of 22.4%. Wells Fargo is offering a dividend yield of 1.6%, in contrast to Citigroup's yield of 0.1%. Also, Wells Fargo has a higher return-on-equity of 12%, versus 6.5% offered by Citigroup. These valuations of Wells Fargo, as well as others, are indicators of the company's superb performance and its subsequent buy rating. Operating cash flow from the last full fiscal year is $9.2 billion.
Boston Scientific Corporation (BSX) is a developer and marketer of medical specialties. Shares of the company are currently trading at $6. Over the last 52 weeks, its shares have traded between a narrow range of $5.3 and $7.96. The company has a beta of 0.9, indicating that its shares are not highly volatile. Also, it has generated a profit margin of 7.3%.
Boston Scientific's price-to-sales ratio of 1.1 times is lower than 2.2 times of St. Jude Medical, Inc. (STJ). Also, its operating margin of 14% is significantly higher than the industry average of 0.5%, indicating that the company is doing well. With the company contemplating cutting its costs and selling near its 52-week lows, I believe that the stock is a great purchase, which will reward investors in the long term. Operating cash flow over the trailing twelve months is $1.1 billion.
Chevron Corporation (CVX) is an energy company that deals with petroleum, chemicals and power generation. Shares of the company are currently trading near its yearly highs, at $106.7 and have traded between $86.68 and $110.99. The company's beta of 0.94 shows its relatively insignificant stock volatility. Chevron has a dividend yield of 3% and it has generated a return-on-equity of 24%.
Chevron's gross margin of 32% and operating margin of 16% are greater than British Petroleum, plc (BP)'s 15% and 8%, respectively. Chevron also has higher earnings per share of $13.5 versus $7.2, reported by British Petroleum. Conservative investors should wait for a further drop in Chevron's shares, before buying. Currently, the company has filed an appeal with the National Court of Justice in Ecuador and is hoping for a ruling in its favor. Chevron has also announced the discovery of natural gas near Australia. This news has the potential to increase its share price north of its 52-week highs. On an operating basis, cash flow over the last 12 months came in at $40 billion.
E.I. du Pont de Nemours and Company (DD) is a science and technology company that has diversified its operations in seven different segments. Shares of the company are currently trading at $49.4. Over the last 52 weeks, its shares have traded between $37.1 and $57. The company's beta of 1.62, is an indicator of the volatile nature of its shares. Also, DuPont reported a dividend yield of 3.3% and a return-on-equity of 32.4%.
DuPont is doing better than its competitor DOW Chemicals (DOW). DuPont reported a gross margin of 28.7% and an operating margin of 12.9%, while DOW Chemicals reported values of 15.7% and 7.5% respectively. With a cheap valuation that includes consistent earnings, low debt and a high return-on-equity, DuPont can be considered a worthy investment. Operating cash flow now stands at $4.9 billion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
