Dividend stocks have been performing well, even in the face of some very serious challenges for the global economy, and even on days when stocks are seeing sharp declines. The demand for dividend stocks is likely to remain high because the Federal Reserve plans to keep rates extremely low, at least until 2014. Many dividend stocks are trading near 52-week highs as investors look for yield in a low interest rate environment. However, there are a number of stocks that pay a solid dividend, and yet according to analysts, they still have significant upside potential. Here are a few dividend stocks that analysts expect to rise by about 30-50%:
Caterpillar, Inc. (CAT) shares started this year out at about $90, and rose to around $115. But concerns over an economic slowdown in China, the debt crisis in Europe, and even signs of weakness in the United States, have sent the stock back down to about $94. The recent drop could be another opportunity to buy into this maker of heavy equipment which is used for agricultural, mining and construction purposes. Caterpillar is poised to benefit from the long term increases in the global population and demand for food, minerals and construction. This company has a history of raising the dividend over the past few years. For example, the quarterly dividend was 25 cents per share in 2005, but after annual increases, the dividend has nearly doubled to 46 cents per quarter. In April, an analyst at Longbow gave the stock a buy rating and set a $132 price target. With the stock trading near $95 per share, this could provide investors with gains of about 40%.
Here are some key points for CAT: Current share price: $93.73. The 52 week range is $67.54 to $116.95. Earnings estimates for 2012: $9.71 per share Earnings estimates for 2013: $11.47 per share Annual dividend: $1.84 per share, which yields 1.9%
R.R. Donnelley & Sons (RRD) shares have pulled back to just about $11, and that is providing investors with a potential buying opportunity, for multiple reasons. Since this company provides printing services and specializes in products like catalogs, magazines, forms, labels, investors seem concerned that sales could decline with economic conditions in the United States. However, the fears seem overblown. The company recently reported earnings of $37.4 million, or 21 cents per diluted share for the first quarter of 2012, which compares favorably with earnings of just 16 cents in the same period last year. Non-GAAP net earnings for the first quarter totaled $78.8 million, or 44 cents per diluted share. R.R. Donnelley has provided 2012 full-year earnings per share guidance to be in the range of $1.84 to $1.92. That level of earnings can easily cover the dividend at $1.04 per share annually, so the dividend appears safe, with a payout ratio of just about 55%. Earlier in 2012, an analyst at Barclays Capital gave the stock an overweight rating and set a $16 price target. With the stock trading near $11 per share, this could provide investors with gains of about 50%, plus generous dividend payments while waiting for a higher share price.
Here are some key points for RRD: Current share price: $10.92. The 52 week range is $10.87 to $21.34. Earnings estimates for 2012: $1.83 per share Earnings estimates for 2013: $1.88 per share Annual dividend: $1.04 per share which yields 9%
Chevron Corporation (CVX) shares have pulled back with the price of oil and the stock is starting to look very cheap for investors who have a long-term horizon. With oil and the markets in a downtrend, even Chevron could drop further, so it makes sense to buy in stages. Chevron raised the dividend to 90 cents per quarter this year and it has increased the dividend for 25 consecutive years. Chevron recently reported first quarter earnings of $6.5 billion, or $3.27 per share. Chevron shares makes sense for value investors, since the stock trades for about 8 times earnings. Earlier in 2012, an analyst at Deutsche Bank gave the stock a buy rating and set a $130 price target. With the stock trading near $102 per share, this could provide investors with gains of about 30%.
Here are some key points for CVX: Current share price: $102.69 The 52 week range is $86.68 to $112.28 Earnings estimates for 2012: $13.38 per share Earnings estimates for 2013: $13.55 per share Annual dividend: $3.60 per share which yields 3.5%
RadioShack Corp. (RSH) shares were trading around $10 in January, and have since lost about 50% in the past few months. A combination of weaker than expected earnings and investor concerns about the competition Radio Shack is seeing from Internet companies like Amazon.com (AMZN), has sparked a big drop. However, the fears might be overblown as the company is expected to remain profitable and it pays a very strong dividend. The dividend could be cut because it is currently above earnings estimates, however a dividend cut might be priced in for the most part. Even if the dividend was reduced by half, it would still yield over 5%. This is a more speculative stock, but there appears to be plenty of upside if the company can boost profits or if it is the target of a takeover, as some expect. Earlier this year, an analyst at Barclays Capital gave the stock an equal weight rating and set a $8 price target. With the stock trading near $5 per share, this could provide investors with gains of about 60%.
Here are some key points for RSH: Current share price: $4.68 The 52 week range is $4.67 to $16.36 Earnings estimates for 2012: 30 cents per share Earnings estimates for 2013: 39 cents per share Annual dividend: 50 cents per share which yields 10.6%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.