Large cap stocks can offer more stability and lower risk when compared to smaller cap peers. This can be advantageous to dividend investors because it can translate to more predictable dividend payouts. Today we focused on large cap companies with sustainable payout ratios, and honed in on those that also look undervalued from a price-multiple perspective, even though analysts rate these companies as 'Buy'. We came up with a diverse list of companies that you might find interesting.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
We first looked for large cap dividend stocks. We then looked for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We then looked for companies with a low price-multiple premium (forward P/E<10)(P/S<1). We did not screen out any sectors.
Do you think these large-cap stocks hold solid value? Use our list to help with your own analysis.
1) Raytheon Co. (RTN)
|Industry:||Aerospace/Defense - Major Diversified|
Raytheon Co. has a Dividend Yield of 4.04% and Payout Ratio of 31.64% and Analysts' Rating of 2.50 and Forward Price/Earnings Ratio of 8.84 and Price/Sales Ratio of 0.67. The short interest was 2.43% as of 06/04/2012. Raytheon Company, together with its subsidiaries, provides electronics, mission systems integration, and other capabilities in the areas of sensing, effects, and command, control, communications, and intelligence systems, as well as a range of mission support services in the United States and internationally. The company offers integrated defense systems that include integrated air and missile defense, radar solutions, and naval combat and ship electronic systems; and intelligence and information systems that comprise defense and civil mission, enterprise intelligence, information security, and mission operations solutions, as well as special missions and technologies. It also provides missile systems, including air warfare, air and missile defense, naval weapon, land combat, advanced missiles and unmanned systems, and advanced security and directed energy systems. In addition, the company offers network centric systems that comprise integrated communications systems; security and transportation solutions; combat and sensing systems; advanced programs; and command, control, communications, computers, and intelligence systems.
2) Nucor Corporation (NUE)
|Industry:||Steel & Iron|
Nucor Corporation has a Dividend Yield of 4.08% and Payout Ratio of 60.94% and Analysts' Rating of 2.20 and Forward Price/Earnings Ratio of 9.51 and Price/Sales Ratio of 0.56. The short interest was 3.27% as of 06/04/2012. Nucor Corporation, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces hot and cold-rolled sheet steel; plate steel; structural steel comprising wide-flange beams, beam blanks, and sheet piling; and bar steel, such as blooms, billets, concrete reinforcing bar, merchant bar, and special bar quality products.
3) General Dynamics Corp. (GD)
|Industry:||Aerospace/Defense Products & Services|
General Dynamics Corp. has a Dividend Yield of 3.25% and Payout Ratio of 27.57% and Analysts' Rating of 2.30 and Forward Price/Earnings Ratio of 8.30 and Price/Sales Ratio of 0.70. The short interest was 1.00% as of 06/04/2012. General Dynamics Corporation, an aerospace and defense company, provides business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide. Its Aerospace group designs, manufactures, and outfits various large and mid-cabin business-jet aircraft; provides maintenance, repair work, fixed-based operations, and aircraft management services; and performs aircraft completions for aircraft. The company's Combat Systems group offers tracked and wheeled military vehicles, weapons systems, and munitions. Its product lines include wheeled combat and tactical vehicles; battle tanks and infantry vehicles; munitions and propellant; rockets and gun systems; and axle and drivetrain components and aftermarket parts.
4) Prudential Financial, Inc. (PRU)
Prudential Financial, Inc. has a Dividend Yield of 3.24% and Payout Ratio of 34.98% and Analysts' Rating of 1.90 and Forward Price/Earnings Ratio of 5.77 and Price/Sales Ratio of 0.43. The short interest was 1.37% as of 06/04/2012. Prudential Financial, Inc., through its subsidiaries, provides various financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management services in the United States, Asia, Europe, and Latin America.
5) Ameriprise Financial Inc. (AMP)
Ameriprise Financial Inc. has a Dividend Yield of 3.06% and Payout Ratio of 19.83% and Analysts' Rating of 2.10 and Forward Price/Earnings Ratio of 6.81 and Price/Sales Ratio of 0.98. The short interest was 0.99% as of 06/04/2012. Ameriprise Financial Inc., through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company's Advice and Wealth Management segment offers financial planning and advice, as well as brokerage and banking services primarily to retail clients through its financial advisors. The Asset Management segment provides investment advice and investment products to retail and institutional clients.
6) Chevron Corporation (CVX)
|Industry:||Major Integrated Oil & Gas|
Chevron Corporation has a Dividend Yield of 3.73% and Payout Ratio of 23.27% and Analysts' Rating of 2.00 and Forward Price/Earnings Ratio of 7.19 and Price/Sales Ratio of 0.75. The short interest was 1.11% as of 06/04/2012. Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, and production of crude oil and natural gas; liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and processing, transportation, storage, and marketing of natural gas, as well as holds an interest in a gas-to-liquids project.
7) Eaton Corporation (ETN)
|Industry:||Industrial Electrical Equipment|
Eaton Corporation has a Dividend Yield of 3.78% and Payout Ratio of 34.43% and Analysts' Rating of 1.90 and Forward Price/Earnings Ratio of 7.80 and Price/Sales Ratio of 0.84. The short interest was 1.95% as of 06/04/2012. Eaton Corporation operates as a diversified power management company worldwide. The company provides electrical components and systems for power quality, distribution, and control; hydraulics components, systems, and services for industrial and mobile equipment; aerospace fuel, hydraulics, and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy, and safety. It serves the industrial, institutional, governmental, utility, commercial, residential, information technology, oil and gas, renewable energy, marine, agriculture, construction, mining, forestry, material handling, truck and bus, machine tools, molding, primary metals, and power generation markets; manufacturers of commercial and military aircraft and related after-market customers; and original equipment manufacturers and after-market customers of passenger cars, SUVs, and CUVs, as well as heavy, medium, and light-duty trucks.
8) AFLAC Inc. (AFL)
|Industry:||Accident & Health Insurance|
AFLAC Inc. has a Dividend Yield of 3.42% and Payout Ratio of 24.97% and Analysts' Rating of 2.30 and Forward Price/Earnings Ratio of 5.62 and Price/Sales Ratio of 0.78. The short interest was 1.78% as of 06/04/2012. Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance. The company offers various voluntary supplemental insurance products, including cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans, and annuities in Japan. It also provides loss-of-income products, such as life and short-term disability plans; and products designed to protect individuals from depletion of assets, which comprise hospital indemnity, fixed-benefit dental, vision care, accident, cancer, critical illness/critical care, and hospital intensive care plans in the United States. The company sells its products through sales associates and brokers, independent corporate agencies, individual agencies, and affiliated corporate agencies.
9) International Paper Co. (IP)
|Industry:||Paper & Paper Products|
International Paper Co. has a Dividend Yield of 3.73% and Payout Ratio of 38.47% and Analysts' Rating of 1.90 and Forward Price/Earnings Ratio of 8.11 and Price/Sales Ratio of 0.47. The short interest was 2.07% as of 06/04/2012. International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, and north Africa. The company's Industrial Packaging segment manufactures containerboards, including linerboard, medium, whitetop, recycled linerboard, recycled medium, and saturating kraft. Its Printing Papers segment produces printing and writing papers, such as uncoated and coated papers used in copiers, desktop and laser printers, and digital imaging; market pulp for use in the manufacture of printing, writing, and specialty papers, as well as towel and tissue products, and filtration products; and uncoated bristols. The company's Consumer Packaging segment offers coated paperboard for various packaging and commercial printing end uses, such as food, cosmetics, pharmaceuticals, computer software, tobacco products, greeting cards, paperback book covers, lottery tickets, direct mail, and point-of-purchase advertising.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.