Dividend investors can all agree that high yields are nice, but they're even better when the payouts are sustainable. Today we focused on dividend stocks with high yields (5%+) with steady payout ratios, but that also look undervalued by their fundamentals. To hone in on the best of the best, we focused in on stocks with analyst ratings of 'Buy', or 'Strong Buy'. We think you'll like the list we produced.
The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firm's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share
The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
We first looked for stocks that have a high dividend yield (Div. Yield > 5%). From here, we then looked for companies that are trading at low price-multiple valuations (P/CFO<10)(PEG Ratio < 1). We then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any market caps or sectors.
Do you think these stocks are undervalued and have room to trade higher? Use our list along with your own analysis.
1) IRSA Investments and Representations Inc. (IRS)
|Industry:||Real Estate Development|
IRSA Investments and Representations Inc. has a Dividend Yield of 13.25%, a Payout Ratio of 0.00%, a Price/Cash Flow Ratio of 4.32, a Price/Earnings to Growth Ratio of 0.52, and a Analysts' Rating of 2.30. The short interest was 0.43% as of 06/06/2012. IRSA Investments and Representations, Inc., through its subsidiaries and joint ventures, engages in a range of diversified real estate related activities in Argentina. It involves in the acquisition, development, and operation of shopping centers, as well as office and other non-shopping center properties primarily for rental purposes; the development and sale of residential apartment complexes and other residential communities; the acquisition and operation of luxury hotels; and the acquisition of undeveloped land reserves for future development and sale.
2) United Online, Inc. (UNTD)
|Industry:||Specialty Retail, Other|
United Online, Inc. has a Dividend Yield of 9.83%, a Payout Ratio of 75.67%, a Price/Cash Flow Ratio of 2.68, a Price/Earnings to Growth Ratio of 0.49, and a Analysts' Rating of 2.50. The short interest was 9.12% as of 06/06/2012. United Online, Inc., through its subsidiaries, provides consumer products and services over the Internet in the United States, Europe, and internationally. The company operates in three segments: FTD, Content and Media, and Communications. The FTD segment provides floral and related products, including occasion gifts, bath and beauty products, jewelry, wine, fruit and other gift baskets, chocolates, and stuffed animals to consumers and retail florists, as well as to other retail locations offering floral and related products and services.
3) Telefonica, S.A. (TEF)
|Industry:||Telecom Services - Foreign|
Telefonica, S.A. has a Dividend Yield of 17.52%, a Payout Ratio of 126.82%, a Price/Cash Flow Ratio of 6.59, a Price/Earnings to Growth Ratio of 0.21, and a Analysts' Rating of 1.00. The short interest was 0.80% as of 06/06/2012. Telefnica, S.A. provides fixed and mobile telephony services primarily in Spain, Latin America, and rest of Europe. It offers various mobile and related services and products that consist of mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and trunking and paging services. The company's fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long distance and fixed-to-mobile communications services; corporate communications services; video telephony; supplementary and business-oriented value-added services; intelligent network services; leasing and sale of handset equipment; and telephony information services.
4) Aircastle LTD (AYR)
|Industry:||Rental & Leasing Services|
Aircastle LTD has a Dividend Yield of 5.43%, a Payout Ratio of 35.54%, a Price/Cash Flow Ratio of 3.11, a Price/Earnings to Growth Ratio of 0.73, and a Analysts' Rating of 2.40. The short interest was 2.86% as of 06/06/2012. Aircastle Limited, through its subsidiaries, engages in the acquisition, lease, and sale of high-utility commercial jet aircraft to passenger and cargo airlines worldwide. The company also makes investments in various aviation assets, including debt investments secured by commercial jet aircraft. As of December 31, 2011, its aircraft portfolio consisted of 144 aircrafts that were leased to 65 lessees located in 36 countries, and managed through offices in the United States, Ireland, and Singapore.
*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.