I have always been a fan of growth and value stocks, especially recently. The more the economy seems to flutter like a feather in the wind, the more attractive these stocks are for me. Below I have compiled the data for four stocks that I have in my portfolio or might add due to their consecutive positive earnings results (despite the global meltdown). Not only are their earnings exceptional, but these stocks have extraordinary 52-week price increases and have an above industry average payout ratio on their dividend. I am a huge proponent of dividend investing because it provides a steady stream of income to live off, whether it is monthly or quarterly. Below are four strong growth and value stocks that are great for any portfolio and pay dividends:
McDonald's Corporation (MCD) franchises and operates McDonald's restaurants in the global restaurant industry. These restaurants serve a varied, limited, value-priced menu in more than 100 countries around the world. The current market price is $99.81 with a one-year analyst price target of $107.91. This represents an 8.12% upside potential not including its current 2.8% dividend yield. This stock has increased nearly 11.53% since I last mentioned it in my article here, and I believe it is even better positioned today than in October. Considering the fact that the 52-week price change is 33.59%, I feel this analyst 11.5% consensus is very conservative.
Compared to its competitors, MCD performs much better, and as I stated earlier, is even better positioned now than before.
Yum Brands (YUM)
McDonald's has a very attractive and well deserved 5-star S&P rating. McDonald's currently trades above its 10, 21, 50, and 200-day moving averages of $100, $99.33, $99.33, and $90.38 respectively.
MCD announced Q4 EPS of $1.33, beating analyst consensus of $1.30. Total revenues rose 9.8%, with global sales up 7.5%. It appears that the company is still gaining market share with its "Plan to Win" corporate strategy even in this shaky economy. I believe MCD will continue to see incremental sales growth from its expanding menu items that target more affluent customers and also from its ongoing restaurant modernization efforts.
MCD has continued sustained growth domestically and internationally, despite the turmoil in the European Union. If this company can continue to grow in the face of a great recession the company should continue to see growth if an expanding economy. Another factor attributing to growth is the growing dependence on quick and affordable food in our fast-paced lives. I believe this is a great growth and value stock to own forever.
Mattel, Inc. (MAT) designs, manufactures, and markets a broad variety of toy products worldwide through sales to its customers and directly to consumers. The current market price is $32.62 with a one-year analyst price target of $35.73. This represents a 9.53% upside potential, not including its 3.8% dividend yield. Given the 52-week price change of 29.94% I feel the 9.53% is very conservative.
Compared to its competitors, MAT performs very well.
JAKKS Pacific (JAKK)
Mattel's technical analysis works in its favor as well. The company is currently trading above its 21, 50, and 200 day moving averages of $31.53, $29.78, and $27.49 respectively and its Moving Average Convergence/Divergence indicates a Bullish Trend.
I like the management focus of MAT; management is focused on top-line growth, cost cuts, increasing international sales, and growth through acquisitions. The company is also a key player in the toy industry, with leading brands under its umbrella. Mattel has numerous traditional toy brands that have been category leaders in multiple product segments for a number of years. Of the company's major brands, Barbie and Hot Wheels remain the leading ones with their core lines and new lines such as WWE, Thomas & Friends, and Toy Story 3.
Not only is the brand very strong, but the balance sheet is also very strong with a good cash flow position. Combined with potential margin expansion and share repurchases, MAT should be able to generate EPS growth in the high single digits over the long term. Also, the company is expected to use its free cash flow to invest in strategic acquisitions further making this a great growth and value stock. I believe this stock is a great addition to any portfolio.
The Home Depot, Inc. (HD) is a home improvement retailer. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products and provide a number of services. The current market price is $47.52 with a one-year analyst price target of $50.04. This represents a 5.3% upside potential not including its dividend yield of 2.5%. In the past year, the stock has hit a 52-week low of $28.13 and 52-week high of $48.07 with a 52-week return of 28.83%. Despite the housing crisis putting 2011 home sales at the worst in history I believe HD has weathered the worst of the storm.
HD's current revenue growth of 2.3% is substantially above its five-year average of -3.6% which shows great signs of improvement in the near future. Based on Trailing P/E, HD currently trades at a 3% discount to its Home Improvement Retailers Industry peers. Despite the discounted price, HD's fundamentals are relatively in-line or better than its peers.
Positive arguments in regard to this stock include: low financial risk on account of the stock's liquidity, huge market capitalization, large cash balance, and excellent credit rating. There have also been positive indicators for the near term include improving trends in California and Florida. Not only does Home Depot have an unmatched brand name and presence domestically, but an international expansion provides HD with long-term growth opportunity. From 2008-2011 HD posted a three-year rate of decline in sales of 4.1%, but sales are expected to increase 2.8% in 2012 and 2.3% in 2013. Despite the fear and uncertainty in the housing market I believe its diverse portfolio and strong fundamentals will lead it to further growth this year and beyond.
Microsoft (MSFT) is engaged in developing, licensing and supporting a range of software products and services. It also designs and sells hardware, and delivers online advertising to the customers. The current market price is $31.78 with a one-year analyst price target of $31.96. This represents a 1% upside potential not including its 2.6% dividend yield. The company has a 52-week price change of 22.2% and I feel this is a realistic number for this year as well despite the analyst consensus of 1%. MSFT has a beta of 0.97, which shows the stock runs almost parallel with the market, but is relatively a little safer.
Based on forward PEG, MSFT currently trades at a 9% discount to its Software Industry peers and its current trailing P/E of 11.5 represents a 74% discount to its Software Industry average. Given this discounted price, MSFT fares very well compared to its peers. Microsoft has an operating margin of 38.04% compared to; Apple (AAPL) at 33.87%, Google (GOOG) at 32.3% and Oracle (ORCL) at 36.96%.
Microsoft has a market cap of 266.39B and a net income of 23.47B, this represents a net income of 8.81% of market cap. This number is better than AAPL with a market cap of 503.4B and net income of 32.98B making up 6.55%. Despite some market share loss to Apple and the Linux operating system in recent years, Microsoft Windows operating systems still run more than 90% of all PCs currently in use.
From fiscal year 2002 through 2011, total revenue increased at a compound annual growth rate (CAGR) of 11%. Other excellent news for MSFT is the news it announced this month that the Nokia Lumia 900 and HTC Titan II will both be launched through AT&T in the coming months on 4G. I believe due to this Microsoft will see significant traction in the mobile space given the Windows 8 Metro style look, Nokia partnership, and increasing support from manufacturers. MSFT notes 500M users on Windows 7 (best selling ever). Also, Xbox remains very successful and Kinect, which has helped transform the Xbox, will be coming to Windows on February 1.
Those that say MSFT is dead money, I feel are not seeing what is happening. Moving Average Convergence/Divergence indicates a Bullish Trend. Also, the 10, 21, 50, and 200 day moving averages of $30.86, $30.56, $28.62, and $26.45 respectively represent a bullish trend. ROA is 16.75% and ROE is 41.68% with an EPS of 2.76. For fiscal year 2012, analysts estimate that MSFT will earn $2.74. For fiscal year 2013, analysts estimate that MSFT's earnings per share will grow by 11% to $3.01.