Despite a strong year-to-date advance for the S&P 500 with a 12% return, many large, high quality companies are still trading below their book value. We looked at stocks paying dividends that are ranked 4 or 5 stars for quality but had a price to book ratio below 1.0. At this time, each of these stocks have surpassed the S&P 500 year-to-date return indicating they are not value traps. In addition, each of these stocks has a VERY BULLISH equity summary score. Here is the list of stocks selling below book value.
Lincoln National Corporation (LNC) engages in multiple insurance and retirement businesses in the United States. It sells a range of wealth protection, accumulation, and retirement income products and solutions. LNC is up 27% YTD but still trades at a price-to-book ratio of 0.51. LNC has a current dividend yield of 1.3% with a 60% dividend increase in the past year. LNC has a project EPS growth of 9% next year compared to this year. We expect that management will continue to use its excess free cash to repurchase shares under its share buyback program. As of December 31, 2011, LNC's securities repurchase authorization was for $540 million or 7.3% of current market cap.
Barclays PLC (BCS) provides various financial products and services worldwide. It offers retail and commercial banking, credit cards, investment banking, wealth management, and investment management services. BCS is up 32% YTD but still trades at a price-to-book ratio of 0.51. BCS has a current dividend yield of 2.6% with a 10.5% dividend increase in the past year. BCS has a project EPS growth of 19% next year compared to this year. While Barclays has put greater emphasis on international and emerging market operations, volatile conditions in Spain and Italy have hampered expansion plans. We see pretax profit growing steadily once the financial crisis eases. We see operating expenses rising modestly in 2012 as BCS cautiously turns to a more growth-oriented strategy, but expect cost-cutting efforts and the sale of unprofitable businesses to help profitability.
MetLife, Inc. (MET) provides insurance, annuities, and employee benefit programs in the United States, Japan, Latin America, the Asia Pacific, Europe, and the Middle East. MET is up 16% YTD but still trades at a price-to-book ratio of 0.66. MET has a current dividend yield of 2.0%. MET has a project EPS growth of 8% next year compared to this year. We view MET's business mix and geographic reach as attractive, but note that execution risk remains as MET seeks to exit banking and mortgage operations. The shares, which have declined somewhat of late, now appear undervalued vs. peers.
Valero Energy Corporation (VLO) operates as an independent petroleum refining and marketing company. The company operates through three segments: Refining, Ethanol, and Retail. VLO is up 19% YTD but still trades at a price-to-book ratio of 0.85. VLO has a current dividend yield of 2.39% with a 200% dividend increase in the past year. VLO has a project EPS growth of 15% next year compared to this year. In 2012, we believe the company will benefit from increasing distillate demand, leading to higher exports. In 2011, VLO spent $3.0 billion on capital investments. Valero's budget for capital expenditures is $3.4 billion in 2012. It plans to complete its Hydrocracker projects at Port Arthur and St. Charles in the second half of 2012.
JPMorgan Chase & Co. (JPM) is a financial holding company that provides various financial services worldwide. JPM is up 30% YTD but still trades at a price-to-book ratio of 0.91. JPM has a current dividend yield of 2.77% with a 20% dividend increase in the past year. BCS has a project EPS growth of 12.7% next year compared to this year. We forecast a 3.3% increase in net revenues in 2012, following a 5.3% decline in 2011. Fee income and gains should increase 8.0%, including a 9.8% increase in core fee income, partly offset by a decline in securities gains and other income. We expect trading and mortgage fees to be the primary drivers of core fee income in 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.