During the past few years, the financial markets have been hit by one crisis after another. For example, the market was crashed by the European debt crisis over the past summer. But these issues will not last forever. Stocks are priced at attractive multiples based on current and forward earnings. Since the end of the third quarter last year, the S&P 500 index was up nearly 18%. Conservative investors who are investing in long-term Treasuries probably won't be able to beat the inflation. On the other hand dividend stock investors will potentially enjoy much higher yields and capital gains. That's why we have been consistently recommending dividend stocks as an alternative to long-term Treasuries.
Below we compiled a list of 14 large-cap companies with high dividend yields, low debt ratios, and attractive multiples. All stocks in our list have market capitalizations above $2 billion, Total Debt / Equity ratio of below 0.4, P/E ratio of below 15 and annualized dividend yields of at least 3%. The market data is obtained from Finviz.
American Eagle Outfitters, Inc.
Atlas Pipeline Partners LP
Atlantic Power Corporation
Kayne Anderson MLP Investment Company
Northrop Grumman Corporation
NYSE Euronext, Inc.
Rhino Resource Partners LP
Terra Nitrogen Company, L.P.
Waddell & Reed Financial Inc.
Among the 14 stocks listed above, Intel Corporation is the most popular one among hedge funds. At the end of the third quarter of 2011, there are 42 hedge funds with INTC positions in their 13F portfolios. For example, Ken Fisher's Fisher Asset Management had $414 million invested in INTC. Intel is a semiconductor chip maker company. It reported net income of $3.4 billion for the fourth quarter of 2011, up from $3.2 billion for the same quarter of 2010. INTC has a market cap of $137B, a total debt-to-equity ratio of 0.16, and a P/E ratio of 11.21. It has a dividend yield of 3.12% and it has been increasing its dividend payouts for 8 consecutive years. It increased its quarterly dividend from $0.1812 to $0.21 per share, which was paid on September 1, 2011.
Another mega-cap strong dividend stock is Chevron Corporation . It has a market cap of $215B, a low P/E ratio of 7.99, and a low debt-to-equity ratio of 0.08. CVX has a dividend yield of 3.01% and the company has been increasing its dividend payouts for 24 consecutive years. It recently increased its quarterly dividend from $0.78 per share to $0.81 per share, which was paid on December 12, 2011. CVX is also quite popular among hedge funds. As of September 30, 2011, thirty-eight hedge funds disclosed owning CVX in their 13F portfolios. For instance, Bill Miller's Legg Mason Capital Management reported to own $125 million worth of CVX shares at the end of September.
ConocoPhillips also has high dividend yield, low debt and low P/E ratio. It has a market cap of $93B, a P/E ratio of 8.96, and a total debt-to-equity ratio of 0.35. The energy company reported fourth-quarter net income of $3.4 billion in 2011, compared with $2.0 billion for the same period a year earlier. It has a dividend yield of 3.77% and it has been increasing its dividend payouts by 11 consecutive years. ConocoPhillips recently announced that it would increase its quarterly dividend from $0.55 to $0.66 per share, which will be paid to its shareholders at the beginning of March. At the end of the third quarter, there are 32 hedge funds with COP positions. Warren Buffett is the most bullish hedge fund manager about COP. His Berkshire Hathaway had $1.8 billion invested in this stock at the end of September.
We like dividend stocks. Our previous study showed that the average return of high dividend yielding stocks was 13.04% between 1927 and 2009, beating the market by an average of 1.36% per year. We believe that strong dividend stocks can provide investors with attractive risk-return combinations as well as some inflation protection.