4 Picks From Cramer's Dividend Stocks: Part II

 |  Includes: DUK, GIS, PFE, VZ
by: Efsinvestment

Here are another four stocks from "Cramer's Top Dividend Stocks 2012" list, along with my opinions about them. The O-Metrix Grading System is applied where possible, as well. Click here for Part I.

Stock Name


O-Metrix Score

My Take

Pfizer Inc.



Wait For a Pullback

Verizon Communications



Buy below $40

Duke Energy




General Mills




Click to enlarge

Source: Data are taken from Finviz/Morningstar. You can download the O-Metrix calculator here.

Pfizer Inc.

"Even if the stock does nothing, you're going to be a big winner in a tough market," Cramer comments on this name. This statement is quite correct as the stock returned about 8% since February 6th, which is quite a gain given Pfizer's distressing background. The estimated annual EPS growth for the next five years is 3.0% and with a Beta value of 0.71, Pfizer is in a good position in terms of volatility among its peers. Its O-Metrix score of 2.25, however, is below the average.

Pfizer's current yield of 3.90% is among the best yields in the market. As the stock returned around 22% in the last six months, Pfizer's attraction faded away. If Pfizer's infant nutrition business sale to Nestle (OTCPK:NSRGY) is approved, the dividend will surely go higher. You can keep Pfizer just for its dividend, but make sure you don't pick it up at this level. Balance sheet is showing some red flags, so let's hope this sale optimizes Pfizer.

Verizon Communications

Verizon is another stock that is slightly overbought. Gaining over 12.4% in only six weeks, Verizon has a Relative Strength Index around 67.8%. With a juicy dividend of 4.83%, Verizon is among my favorite dividend picks. With a Beta value of 0.52, the telco is the third least-volatile in its industry.

There will be a breakdown for sure, but I wonder if it's going to be a fair one. Anywhere above $40 is not going to settle this matter. Verizon is a great trustworthy company, covering almost all of the U.S. population. Dividends are perfectly stable. Due to the healthy revenue growth, Verizon keeps heading north. Let's wait and see when things will turn around. Besides, it's all about the coverage of its 4G LTE network when it comes to assessing a mobile network operator in today's world, and Verizon is quite artsy on that. Pick anywhere below $40, I say. Solid numbers and strategic moves always lead to consistent growth. Moreover, the company has the iPhone in its arsenal.

Duke Energy

As one of the largest electric utilities in the States, Duke Energy has been going through some tough times. Since my negative comment four months ago, Duke is still in the same place. Duke has not been able to raise its dividend for the first time since February 2007. Estimated annualized EPS growth forecast for the next five years (7.6%) seems optimistic to me, as Duke is stuck with the never-ending Progress Energy (PGN) purchase.

Numbers don't leave a good impression currently, as the stock has a PEG value of 3.3, and a P/S ratio of 2.0. However, the balance sheet seems attractive. Cash flow, revenue and assets have been heading straight north for more than three years. Debt-to equity ratio is 0.8, below the industry average of 1.2. I would love to recommend buying Duke, but the uncertainty of the Progress Energy sale is a heavy burden to the company. Hold if you own it. Based on these numbers, Duke has a D Grade O-Metrix score of 3.65.

General Mills

Among these four, General Mills is the most reasonable choice as far as I can tell. The stock is in a relatively good place in terms of Relative Strength Index, and Beta value (0.17). General Mills started going down after it hit $41 on January 18th, which is currently trading a little above $39 a share. Analysts estimate a 7.7% annual EPS growth for the next five years, while the profit margin is 9.6%.

General Mills is currently trading 4.07% lower than its 52-week high, whereas its target price indicates an 8.1% increase potential. General Mills is trying to hold its ground in an environment where "a weak economy and commodity prices that remain above long-term averages have weighed on the performance of firms," as Morningstar states. In such an environment, the company deserves credit for its performance. Revenue growth is next to highest since August 2008. Return on Equity (ROE) is 24.4%, almost doubling the industry average of 12.4%. I see no reason to avoid such a lovely stock. With a 3.11% dividend, General Mills has an O-Metrix score of 3.49.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.