Among the stocks that I am reviewing in this article are some of the world's leading designers and manufacturers of sophisticated jet-fighter planes, weapons delivery systems, commercial aircraft, commercial construction vehicles and a financial services provider. These stocks have been chosen for review because they have produced high yields in the last few quarters and are expected to do the same going forward. There are several positive catalysts that have allowed these five stocks to produce high yields: They all enjoy favorable investor sentiment in the market, have widened their competitive moat by investing in new ventures, and have reported sizable revenues that have exceeded the projected estimates of financial analysts and stock gurus. I believe these five stocks are hot buys right now. Here are their financial performances in detail:
Goldman Sachs (GS) provides a wide range of financial services to a diverse clientele which includes small businesses, huge corporations and governments. Investing and lending services, investment banking, institutional client services and investment management are just a few of the major services this company earns its revenues through. The not so recent financial crisis has affected the company's trading activity, as investors observed the company fall into a quagmire of legal trials and financial tribulations. A majority of investors have criticized the company for relying heavily on proprietary trading in order to meet financial targets. However, the standing valuation of its stock has not done full justice in reflecting its performance over the last few quarters.
I firmly believe that Goldman Sachs has the capacity to generate higher return on equity. Shares of Goldman Sachs are trading at an unreasonably low rate of 77% of total book value. It also has a market capitalization of nearly $57 billion, with an average trading volume of around $8 million. The price-to-earnings ratio is somewhat stable at around 25 with good earnings per share around $5. Dividend payout ratio is also good at about 0.5, with a dividend yield exceeding 1%.
Goldman Sachs has already shown good performance in the first month of 2012 and I expect that it will continue this trend. The company is among the few gifted stocks that have traditionally had a flexible and dynamic business model, which, when coupled with high liquidity and capital levels, have boosted growth. I believe the company will continue to show solid growth and produce higher yields. I rank the company among the best stock performers of 2012.
Caterpillar (CAT) impressed investors by placing second on the Dow 30 Ranking after a steady run in the opening month of 2012. With a favorable 21% return on shares, I believe the company has the capacity to stretch these figures in the remaining two months of the current quarter. Furthermore, based on a quarterly payout ratio of nearly 46, Caterpillar currently has an impressive dividend yield of around 2%.
The company has recently reported a fourth-quarter profit of nearly $1.5 billion, which adds up to roughly $2 per share. Compared to previous numbers, the company has increased its profit by approximately $1.35 billion. Investors are also optimistic that the company will continue its drive to effectively tackle internal operational issues and emerge on top of the market. The company has a total market capitalization of almost $74 billion. Caterpillar has confirmed that its sales and revenue outlook for the current year has been extended to the $68 to $72 billion range.
The price-to-earnings ratio is steady at 15 and impressive earnings per share of $8 have attracted favorable investor sentiment for the business. Caterpillar is focused to drive up its profits earned per share to around $9. The company has traditionally enjoyed a good dividend history with a current payout ratio of 0.4 and a dividend yield of nearly 2%. Judging from these positive financial indicators, Caterpillar is positioned for growth and higher revenues. I believe the company is a safe investment, even at current price levels.
Lockheed Martin (LMT) is ranked among the world's leading manufacturer of sophisticated avionics technology. The company is world renowned for designing and manufacturing some of the most sophisticated fighter planes and weapons delivery systems such as the F-16, F-18 Hornet and F-22 Raptor. Recently, the company has been awarded contracts by the U.S. military to invest in research and development of unmanned aerial surveillance, reconnaissance and fighting vehicles. Lockheed Martin reported losses in the first two quarters of 2011, primarily due to tough competition from leading competitor Boeing, and overall global economic instability. In the third quarter of 2011, America announced plans to withdraw military forces from hostile regions such as Iraq and Afghanistan. At the time, investor sentiment was at an all-time low with most shareholders in a fix whether to hold or sell their stock.
Very recently however, Lockheed Martin was awarded a $66 million contract to support a U.S. Army research lab. The timing of this agreement was ideal, allowing the technology giant to regain favorable investor sentiment. As a result, investors have retained their current stock while others have increased their investments in the business. Lockheed Martin currently has a massive market capitalization which exceeds $28 billion. On average, the trading volume per day is around $2 million. After a promising start to 2012, with positive financial indicators and substantial growth, the price to earnings ratio is at nearly 11, with earnings per share easily exceeding $8.
Lockheed Martin also earns a large part of its revenue from international sale contracts, which have shown a remarkable increase in recent years. Expanding markets of Korea, China, Korea and India are all good prospects for expansion. Lockheed Martin has traditionally enjoyed a good dividend history which has attracted favorable investor sentiment. The company currently has a dividend payout ratio of 1 and a yield of nearly 5%. With prevailing market conditions conducive to growth, and Asian markets showing increasing potential, my analysis of financial data suggests that the company is positioned for growth in the current year.
Boeing (BA) is considered to be the number one competitor of Lockheed Martin. Boeing is the world leader in the design and manufacture aspects of commercial and military aircraft, sophisticated aerial vehicles, and weapons delivery systems. Its most recent financial indicators have been more impressive than its arch-rival Lockheed Martin, with a price-to-earnings ratio of nearly 15 against 10 reported by LMT, and a price-to-sales ratio of almost 1 against LMT's 0.8. Boeing's ratios are considerably higher than the industry averages, suggesting that Lockheed Martin is trading at a cheaper price than its peers.
In spite of announcements by the American government to cut military spending substantially, Boeing's performance in the last few quarters has convinced me to rate it a "buy," along with other leading financial gurus and stock think tanks. The company has been investing in research on unmanned aerial vehicles and weapons delivery systems which will be much cheaper for the military. Therefore, the planned cut in military spending may not affect the military might of America after all. Boeing is a huge force with a massive market capitalization of almost $56 billion and average trading volume of nearly $5 million.
The company has earnings per share of $5, with a price to earnings ratio of more than 14. These numbers are comfortably higher than those reported by Lockheed Martin. Boeing currently has a yield of nearly 2.5%, with a dividend payout ratio of almost 0.5. New deals in emerging markets like Asia are expected to widen the competitive moat of the company, potentially sparking even higher growth. Boeing is working on a massive deal with Jakarta-based Lion Air, which seeks a replacement for its aging fleet of airplanes. This landmark deal is expected to drive up revenue, possibly leading to a dividend hike.
L-3 Communications (LLL) is an intelligence, surveillance and reconnaissance company that has been of particular interest to leading financial analysts and investors. The company was recently upgraded to a buy status after having a favorable run in the market in the last quarter of 2011. The company expects stronger growth as a result of subdued overseas punitive operations. L-3 also has a landmark deal in its pipeline which will allow it to acquire Kollmorgen Electro-Optical. The successful passing of this deal is set to further widen the company's already favorable competitive moat. With a market capitalization of more than $7 billion and an average trading volume of nearly $1 million, L-3 has enjoyed favorable investor sentiment in recent years.
L-3 has earnings per share of nearly $10, with a price to earnings ratio around 7. Dividend payout ratio and yield are reasonable at around 0.5 and 3%. L-3 has also raised its quarterly dividend to 50 cents per share from the previous 45 cents per share. These financial indicators prove that the company has managed to maintain its solid dividend history in the last few quarters. Neither can it be ignored that the company has grown almost 6% in 2011. Judging from current financial indicators, landmark deals in the pipeline, positive investor sentiment and favorable market conditions, I rank L-3 as a good investment venture for 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.