I have picked and analyzed five stocks which are looking very positive for 2012. These stocks are trading at relatively cheap valuations. Four of the stocks have a comparatively high dividend yield too. All of them are expected to continue outperforming their peers in the future. Cheap valuations and high dividend yields make a good mix for screening winning candidates. Here is my analysis:
Chimera Investment Corporation (CIM) is a real estate investment trust. It has market capitalization of $3 billion. The company's shares are currently trading at $3 per share. Chimera Investment generated a profit margin of 90% and a return-on-equity of 17.8%. It reported a dividend yield of 15%.
Annaly Capital Management, Inc. (NLY) and MFA Financial, Inc. (MFA) are competitors of Chimera Investment. Annaly and MFA Financial have price-to-earnings ratios of 12.4 and 7.8 versus Chimera's 5.5. Annaly and MFA Financial also have higher price-to-sales ratios of 11.7 and 7.5 respectively, while Chimera Investment has the same ratio at 5. These ratios indicate that Chimera is cheaper than its peers. With the Fed promising low interest rates, Chimera's spread has been high as it looks to borrow at cheaper short-term rates. Analysts expect Chimera to maintain its high dividends in the long term. I am bullish on the stock too.
Comcast Corporation (CMCSA) engages in the provision of entertainment and communications products and services. It has a market capitalization of $71.6 billion. Shares are currently trading at around $26 per share. It generated a return-on-equity of 8.6% and a profit margin of 7.7%. Comcast reported a dividend yield of 1.7%.
Rogers Communication, Inc. (RCI) is a competitor of Comcast. Comcast has a five year expected price-to-earnings-to-growth ratio of 1.25 versus 1.85 of Rogers, indicating that future earnings growth at Comcast can be bought at a cheaper price now. Rogers reported a significantly higher debt-to-equity ratio of 275 versus 65 reported by Comcast. Comcast recently announced a commitment to the Museum of Broadcast Communications for $2.7 million. Comcast's results in its third quarter were quite robust, with analysts giving it a long-term buy rating.
ConocoPhillips (COP) is an energy company. It has market capitalization of $92.3 billion. Shares are currently trading around $69 per share. ConocoPhillips generated a return-on-equity of around 16% and a profit margin of around 5%. It reported a dividend yield of 3.7%.
Exxon Mobil Corporation (XOM) is a competitor of ConocoPhillips. Exxon Mobil has a higher price-to-earnings ratio of 10.5 versus ConocoPhillips' 8.9. Also, Exxon Mobil had a higher price-to-sales ratio of 1.0 while ConocoPhillips reported the same ratio at 0.4. These ratios indicate that ConocoPhillips is trading at cheaper rates. Exxon Mobil has a lower dividend yield of 2.2%. ConocoPhillips is looking to split into two companies, which is good news for investors in the long term. It has already beaten earnings estimates. With oil companies looking to increase production and explore new sites, ConocoPhillips is also looking to benefit greatly.
Dell, Inc. (DELL) is a developer and manufacturer of laptops, netbooks, tablets, smartphones, and desktop personal computers. It has market capitalization of $30 billion. Shares of the company are currently trading near $17 per share. The company generated a return-on-equity of $47% and a profit margin of around 6%.
International Business Machines Corporation (IBM) is a competitor of Dell. IBM Corporation has a price-to-earnings ratio of 14.6 while Dell's is 8.6. Dell also has a lower price-to-sales ratio of 0.5 versus IBM's 2. These ratios show that Dell is relatively less expensive. Recent users of Hewlett-Packard (HPQ) products are looking to buy Dell products as Hewlett-Packard is re-structuring its business strategy. Despite the European financial crisis, Dell is looking at an increase in demand in the European business sector. Another positive outlook for the company is its buybacks which indicate the company's management's belief in the long-term performance in the company.
Dow Chemical Company (DOW) is a manufacturer of raw materials. It has market capitalization of $39.6 billion. Shares of the company are currently trading near $33 per share. Its large beta value of 3 signifies its volatile shares, which have traded within a wide range of $20.61 and $42.23 per share over the last 52 weeks. Dow Chemicals generated a return-on-equity of 13.4% and reported a dividend yield of 3%.
E. I. du Pont de Nemours and Company (DD), also known as DuPont, is a competitor of Dow Chemicals. DuPont has a higher price-to-sales ratio of 1.2 versus Dow Chemicals' 0.7. DuPont also has a higher enterprise value to EBITDA ratio of 9.4 while Dow Chemicals reported the same ratio at 7.7. Additionally, Dow Chemicals had a lower five year expected price-to-earnings-to-growth ratio of 1.3 while its competitor BASF SE (OTCQX:BASFY) reported a higher ratio of 3.2. These ratios indicate that Dow Chemicals is less expensive than its peers. Dow Chemicals has apportioned some space in Collegeville indicating that it might have plans to provide more jobs. The current low natural gas prices are expected to benefit Dow Chemicals because it is an input for the some of the company's products. Dow Chemicals also recently won an appeal against Nova Chemicals Corporation, which is good news for the company and its investors.