I have identified and analyzed five stocks that can generate alpha for 2012. These are high dividend stocks with relatively cheaper valuations. The growth prospects are strong enough, for these companies to keep paying the dividends. Here is my analysis:
STMicroelectronics N.V. (NYSE:STM) is a semiconductor design and development company. Shares of the company are currently trading around $7 per share. Over the last 52 weeks, its shares have traded within a range of $5.61 and $13.53 per share. STMicroelectronics reported a dividend yield of 4.7%, and it has a beta of 1.82, indicating that the stocks are highly volatile in nature.
Texas Instruments, Inc. (NYSE:TXN) is a competitor of STMicroelectronics. STMicroelectronics reported a price-to-earnings ratio of 7 times versus the 13.5 times reported by Texas Instruments. Also, STMicroelectronics has a lower price-to-sales ratio of 0.6 times versus the 2.7 times reported by Texas Instruments. Both these ratios show that STMicroelectronics is trading relatively cheaper than its competitor. Also, Texas Instruments has a lower dividend yield of 2%.
Despite not meeting expected revenues, the company showed higher earnings-per-share and has been given an average analyst price target of $7.06 per share. STMicroelectronics has a couple of tailwinds such as a new Home Platform and a Smart Sensor Technology, which are both likely to increase the company's valuations in the future. We recommend a hold rating on the stock in the short term.
Credit Suisse Group American De (NYSE:CS) is a financial services company. Its shares are currently trading around $26 per share, and have traded between $22.23 and $47.63 per share over the last 52 weeks. Credit Suisse has a beta of 1.53, indicating that its stock is volatile in nature. Also, it reported a relatively high dividend yield of 5.7%.
Duff & Phelps Corporation (NYSE:DUF) is a competitor of Credit Suisse. Credit Suisse reported a price-to-earnings ratio of 9.7 times while Duff & Phelps reported the same ratio at 26.8 times. Credit Suisse also has a lower price-to-sales ratio of 1.03 times versus the 1.27 times reported by Duff & Phelps, indicating that shares of Credit Suisse are trading cheap.
Credit Suisse is generating a higher profit margin of around 12%, while Duff & Phelps is generating a profit margin of around 5%. Duff & Phelps also has a lower dividend yield of 2%. Recently, Credit Suisse bought almost $7 billion worth of AIG Insurance's (NYSE:AIG) assets in order to bailout the company. We recommend a hold rating on the shares of the company.
Koninklijke Philips Electronics (NYSE:PHG) is a healthcare and lighting product business. Shares of the company are currently trading around $20 per share and have traded between $16.26 and $33.55 per share over the last 52 weeks. The company has a beta of 1.33, indicating that its stocks are volatile in nature.
Despite the company's recent performance, it is doing relatively better than some of its competitors. General Electric (NYSE:GE) reported a price-to-sales ratio of 1.4 times versus the 0.5 times reported by Philips Electronics. Philips also has a lower enterprise value to EBITDA ratio of 5.3 times versus the 16.5 times reported by General Electric, indicating that Philips Electronics is a cheaper company for investors. Also, General Electric is yielding a dividend of 3.6% while Sony Corporation (NYSE:SNE) is yielding a dividend of 1.6%, both of which are lower than that of Philips at 4.8%. Philips Electronics has given a cautious outlook to its investors. The company has a few long-term goals in sight but we recommend a short-term sell rating due to headwinds faced by the company.
Senior Housing Properties Trust (NYSE:SNH) is a real estate investment trust. Shares of the company are currently trading around $22 per share. Over the last 52-week period, its shares have traded between $19.09 and $24.66 per share. The company has a beta of 1.03, indicating relatively little stock volatility. Senior Housing reported a dividend yield of 6.9% and it has a profit margin of around 36%.
LTC Properties, Inc. (NYSE:LTC) is a competitor of Senior Housing and it reported a price-to-sales ratio of 11.5 times, while Senior Housing reported the same ratio at 8.7 times. LTC Properties also has a higher five year expected price-to-earnings growth of 3 times versus the 2 times reported by Senior Housing, indicating that the future share growth of Senior Housing can be bought at a lower price right now. LTC Properties also has a lower dividend yield of 5.5%. Compared to its peers, Senior Housing has shown a relatively higher dividend yield and has been paying dividends since 1999, with dividends rising for 10 consecutive years. We are bullish on the company's performance.
Market Vectors Semiconductor ET (NYSEARCA:SMH) is an investment fund dealing with U.S. exchange-listed companies under the semiconductor market. Shares of the company are currently trading around $34 per share and have traded within a narrow range of $28.86 and $33.90 over the last 52 weeks.
Market Vectors Semiconductor has gained around 10% since the beginning of this year. The company reported an outflow of nearly $18.5 million. Texas Instruments is the biggest holding of Market Vectors Semiconductor and the recent results reported by Texas Instruments are likely to have a slight negative effect on it. We recommend a neutral rating on the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.