7 Large-Cap Dividend Stocks Undervalued By Levered Free Cash Flows

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 |  Includes: ACN, AMAT, AZN, ENIA, NTT, TWX, XRX
by: Kapitall

Interested in stocks that pay dividend income? For ideas on how to start your search, we ran a screen you may find interesting.

We screened large-cap companies (with market caps above $10 billion) that pay dividend yields above 2% and sustainable payout ratios below 50% for those that appear undervalued relative to levered free cash flow.

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 dividend yield.

1. AstraZeneca PLC (NYSE:AZN): Develops, and commercializes prescription medicines for cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation diseases worldwide. Dividend yield at 5.68%, payout ratio at 36.88%. Levered free cash flow at $7.61B vs. enterprise value at $61.84B (implies a LFCF/EV ratio at 12.31%).

2. Enersis S.A. (ENI): Engages in the generation, transmission, and distribution of electricity in Chile, Argentina, Brazil, Colombia, and Peru. Dividend yield at 4.06%, payout ratio at 38.79%. Levered free cash flow at $2.05B vs. enterprise value at $18.01B (implies a LFCF/EV ratio at 11.38%).

3. Applied Materials Inc. (NASDAQ:AMAT): Provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. Dividend yield at 2.50%, payout ratio at 21.17%. Levered free cash flow at $1.60B vs. enterprise value at $12.40B (implies a LFCF/EV ratio at 12.9%).

4. Nippon Telegraph & Telephone Corp. (NYSE:NTT): Provides telecommunications services to residential and business customers in Japan. Dividend yield at 2.49%, payout ratio at 34.22%. Levered free cash flow at $10.43B vs. enterprise value at $102.26B (implies a LFCF/EV ratio at 10.2%).

5. Time Warner Inc. (NYSE:TWX): Operates as a media and entertainment company in the United States and internationally. Dividend yield at 2.46%, payout ratio at 32.41%. Levered free cash flow at $10.73B vs. enterprise value at $53.51B (implies a LFCF/EV ratio at 20.05%).

6. Accenture plc (NYSE:ACN): Operates as a management consulting, technology services, and outsourcing company. Dividend yield at 2.32%, payout ratio at 33.45%. Levered free cash flow at $3.42B vs. enterprise value at $32.65B (implies a LFCF/EV ratio at 10.47%).

7. Xerox Corp. (NYSE:XRX): Engages in the development, manufacture, marketing, service, and finance of document equipment, software, solutions, and services worldwide. Dividend yield at 2.14%, payout ratio at 18.49%. Levered free cash flow at $2.21B vs. enterprise value at $18.38B (implies a LFCF/EV ratio at 12.02%).

*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.