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 good yields (3%+) and steady payout ratios, yet that also look undervalued by their fundamentals. To hone in on the cream of the crop, we focused in on stocks with analyst ratings of 'Buy', or 'Strong Buy'. Our list is pretty interesting.
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 Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
We first looked for dividend stocks. Next, we then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then looked for businesses that are trading at low price-multiple valuations (P/CFO<10)(P/BV<1). We did not screen out any market caps or sectors.
Do you think these stocks will offer healthy returns? Use our screened list as a starting point for your own analysis.
1) Nash Finch Co. (NASDAQ:NAFC)
Nash Finch Co. has a Dividend Yield of 3.29%, a Payout Ratio of 25.93%, a Analysts' Rating of 2.00, a Price/Cash Flow Ratio of 381.61, and a Price/Book Value Ratio of 0.65. The short interest was 3.84% as of 07/02/2012. Nash-Finch Company operates as a wholesale food distributor in the United States. The company's Military segment distributes grocery products to the United States military commissaries and exchanges in the United States and the District of Columbia, Europe, Puerto Rico, Cuba, the Azores, Egypt, and Bahrain. Its Food Distribution segment sells and distributes various branded and private label grocery products and perishable food products to approximately 1,500 independent retail locations through its 14 distribution centers. This segment also provides various services, including promotional, advertising, and merchandising programs; installation of computerized ordering, receiving, and scanning systems; retail equipment procurement assistance; accounting, budgeting, and payroll contract services; consumer and market research; remodeling and store development services; supply chain through Internet services; and securing existing grocery stores.
2) First Interstate Bancsystem Inc. (NASDAQ:FIBK)
|Industry:||Regional - Pacific Banks|
First Interstate Bancsystem Inc. has a Dividend Yield of 3.38%, a Payout Ratio of 44.66%, a Analysts' Rating of 2.20, a Price/Cash Flow Ratio of 4.78, and a Price/Book Value Ratio of 0.79. The short interest was 3.14% as of 07/02/2012. First Interstate BancSystem, Inc. operates as the bank holding company for First Interstate Bank that provides commercial and consumer banking services. Its deposit products include checking, savings, time, and demand deposits; and repurchase agreements primarily for commercial and municipal depositors. The company's loan portfolio consists of a mix of real estate, consumer, commercial, agricultural, and other loans, including fixed and variable rate loans.
3) Prudential Financial, Inc. (NYSE:PRU)
Prudential Financial, Inc. has a Dividend Yield of 3.00%, a Payout Ratio of 34.98%, a Analysts' Rating of 1.90, a Price/Cash Flow Ratio of 1.59, and a Price/Book Value Ratio of 0.65. The short interest was 1.67% as of 07/02/2012. 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.
4) Validus Holdings, Ltd. (NYSE:VR)
|Industry:||Property & Casualty Insurance|
Validus Holdings, Ltd. has a Dividend Yield of 3.09%, a Payout Ratio of 35.38%, a Analysts' Rating of 1.80, a Price/Cash Flow Ratio of 3.51, and a Price/Book Value Ratio of 0.91. The short interest was 3.59% as of 07/02/2012. Validus Holdings, Ltd., through its subsidiaries, provides reinsurance and insurance coverage in the property, marine, and specialty lines markets worldwide. The company underwrites property catastrophe reinsurance, property per risk reinsurance, and property pro rata reinsurance products; and reinsurance on marine risks covering damage to or losses of marine vessels and cargo, third-party liability for marine accidents, physical loss, and liability from principally offshore energy properties. It also underwrites specialty lines of business, which include aerospace and aviation, agriculture, terrorism, life, accident and health, financial lines, nuclear, workers' compensation catastrophe, crisis management, political risks and violence, war, and contingency.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Google Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.