15 S&P 500 Dividend Stocks Undervalued By Levered Free Cash Flows

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 |  Includes: AET, AIZ, AMAT, ANTM, BBY, CCE, EXPE, GCI, LXK, MCK, MRO, NOC, TWX, UNM, WHR
by: Kapitall

Interested in finding stocks that may be trading below their fair value? If so, here are some ideas to get you started on your search.

We ran a screen on the S&P 500 for stocks paying dividend yields above 1% and sustainable payout ratios below 50% for those with the highest ratios of levered free cash flow/enterprise value, potentially indicating that they are undervalued.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. Companies with high ratios of levered free cash flow/enterprise value may be undervalued by the market.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by LFCF/EV.

1. WellPoint Inc. (WLP): Operates as a health benefits company in the United States. Market cap of $22.37B. Dividend yield at 1.76%, payout ratio at 9.51%. Levered free cash flow/enterprise value at 24.67% (levered free cash flow at $3.79B and enterprise value at $15.36B). It's been a rough couple of days for the stock, losing 10.61% over the last week.

2. Best Buy Co. Inc. (NYSE:BBY): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances, and related services primarily in the United States, Europe, Canada, and China. Market cap of $8.77B. Dividend yield at 2.56%, payout ratio at 20.66%. Levered free cash flow/enterprise value at 24.32% (levered free cash flow at $2.16B and enterprise value at $8.88B). The stock is a short squeeze candidate, with a short float at 13.31% (equivalent to 5.61 days of average volume). The stock has lost 26.82% over the last year.

3. Time Warner Inc. (NYSE:TWX): Operates as a media and entertainment company in the United States and internationally. Market cap of $38.0B. Dividend yield at 2.48%, payout ratio at 32.41%. Levered free cash flow/enterprise value at 20.34% (levered free cash flow at $10.73B and enterprise value at $52.76B). The stock has gained 20.89% over the last year.

4. Aetna Inc. (NYSE:AET): Operates as a diversified health care benefits company in the United States. Market cap of $15.44B. Dividend yield at 1.64%, payout ratio at 9.19%. Levered free cash flow/enterprise value at 19.24% (levered free cash flow at $3.12B and enterprise value at $16.22B). The stock has gained 29.28% over the last year.

5. Marathon Oil Corporation (NYSE:MRO): Operates as an international energy company with operations in the United States, Canada, Africa, the Middle East, and Europe. Market cap of $22.20B. Dividend yield at 1.90%, payout ratio at 34.31%. Levered free cash flow/enterprise value at 17.75% (levered free cash flow at $4.06B and enterprise value at $22.87B). The stock has gained 16.94% over the last year.

6. Expedia Inc. (NASDAQ:EXPE): Operates as an online travel company in the United States and internationally. Market cap of $4.15B. Dividend yield at 1.80%, payout ratio at 16.27%. Levered free cash flow/enterprise value at 17.57% (levered free cash flow at $730.88M and enterprise value at $4.16B). The stock has lost 15.58% over the last year.

7. Assurant Inc. (NYSE:AIZ): Provides specialized insurance products and related services in North America and internationally. Market cap of $3.67B. Dividend yield at 1.81%, payout ratio at 34.02%. Levered free cash flow/enterprise value at 14.49% (levered free cash flow at $447.84M and enterprise value at $3.09B). The stock has gained 3.03% over the last year.

8. Northrop Grumman Corporation (NYSE:NOC): Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Market cap of $15.50B. Dividend yield at 3.37%, payout ratio at 30.93%. Levered free cash flow/enterprise value at 14.26% (levered free cash flow at $2.40B and enterprise value at $16.83B). The stock has lost 1.72% over the last year.

9. Applied Materials Inc. (NASDAQ:AMAT): Provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic, and related industries worldwide. Market cap of $16.19B. Dividend yield at 2.58%, payout ratio at 21.17%. Levered free cash flow/enterprise value at 13.72% (levered free cash flow at $1.60B and enterprise value at $11.66B). The stock has had a good month, gaining 14.6%.

10. Whirlpool Corp. (NYSE:WHR): Engages in the manufacture and marketing of home appliances worldwide. Market cap of $4.16B. Dividend yield at 3.68%, payout ratio at 39.71%. Levered free cash flow/enterprise value at 13.48% (levered free cash flow at $824.75M and enterprise value at $6.12B). The stock has lost 36.86% over the last year.

11. Unum Group (NYSE:UNM): Provides group and individual disability insurance products primarily in the United States and the United Kingdom. Market cap of $6.67B. Dividend yield at 1.84%, payout ratio at 13.50%. Levered free cash flow/enterprise value at 13.33% (levered free cash flow at $1.13B and enterprise value at $8.48B). The stock has lost 9.12% over the last year.

12. Coca-Cola Enterprises Inc. (NYSE:CCE): Produces, distributes, and markets non-alcoholic beverages in Europe. Market cap of $8.39B. Dividend yield at 1.93%, payout ratio at 22.10%. Levered free cash flow/enterprise value at 13.21% (levered free cash flow at $1.39B and enterprise value at $10.52B). The stock has gained 8.61% over the last year.

13. Lexmark International Inc. (NYSE:LXK): Develops, manufactures, and supplies printing and imaging solutions for offices. Market cap of $2.64B. Dividend yield at 2.85%, payout ratio at 5.54%. Levered free cash flow/enterprise value at 12.41% (levered free cash flow at $266.89M and enterprise value at $2.15B). The stock is a short squeeze candidate, with a short float at 7.54% (equivalent to 5.32 days of average volume). The stock has lost 3.81% over the last year.

14. McKesson Corporation (NYSE:MCK): Offers medicines, pharmaceutical supplies, and information and care management products and services for the healthcare industry. Market cap of $19.29B. Dividend yield at 1.02%, payout ratio at 16.35%. Levered free cash flow/enterprise value at 12.21% (levered free cash flow at $2.30B and enterprise value at $18.84B). The stock has gained 5.28% over the last year.

15. Gannett Co., Inc. (NYSE:GCI): Operates as a media and marketing solutions company in the United States and internationally. Market cap of $3.66B. Dividend yield at 2.08%, payout ratio at 9.31%. Levered free cash flow/enterprise value at 12.13% (levered free cash flow at $651.40M and enterprise value at $5.37B). This is a risky stock that is significantly more volatile than the overall market (beta = 2.47). The stock is a short squeeze candidate, with a short float at 8.5% (equivalent to 5.08 days of average volume). The stock has had a good month, gaining 13.28%.

*LFCF/EV data sourced from Yahoo! Finance, all other data sourced from Finviz.

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