NiSource Inc (NI) is one of the most traded stocks with an average volume of over three million shares traded daily. It also pays a healthy dividend, offering shell-shocked investors yield in a low-rate environment. Should internet investors fixate on popular stocks like NI?
No. As simple as it sounds, you are better off shopping around than focusing on popular stocks. There are many stocks which offer dividend yields in excess of the 10-year Treasury. Moreover, many of them are trading at lower price multiples.
From a total return perspective that considers capital gains and dividend payments, NI's earnings and future cash flows will determine its value. The future financial potential of a stock can be gauged by using financial metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.
As alternatives to NI, consider the following stocks with strong track-records and solid credit scores:
10-Year Average ROE
Crown Crafts Inc.
Textile - Apparel Clothing
Security Software & Services
Nash Finch Co.
National Healthcare Corp.
Long-Term Care Facilities
Unlike NI, these alternative stocks are all categorized as "safe" according to the Altman Z-score,* indicating that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that these six stocks have grown shareholder wealth at a respectable annual rate. It is clear from these two metrics that each of these five alternative stocks is a "high" quality stock capable of weathering bad times and delivering positive long-term results.
What's more, these stocks are cheaper and have higher growth prospects:
EPS growth past 5 years
EPS growth next 5 years
Based on lower price-to-earnings ratios, price-to-sales ratios, and price-to-book ratios, these stocks are cheaper than NI at current market prices. Better yet, they have better growth prospects according to analyst projections. Rather than restrict yourself to concentrated investments in one popular stock like NI, consider a diversified mix of these five securities as a more attractive alternative.
*Please read the article disclaimer.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.