Investing in dividend stocks that consistently offer moderate to high yields is a sound approach to adding income and building wealth. Today we developed a list of dividend stocks with a track record of providing reliable yields. In addition, they have two other traits that bolster their appeal: all appear to be trading below market value and have received recent analyst ratings of "Buy" or "Strong Buy". We think you will find our list worthy of further research.
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.
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 lets an investor know how much the investment community is willing to pay for every dollar 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 dollar worth of the 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 dividend stocks. From here, we looked for companies that are undervalued when company growth rate is taken into account (PEG Ratio < 1)(P/S < 1). We then looked 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 offer both value and growth? Use our list to help with your own analysis.
1) Diebold Inc. (DBD)
|Price/Earnings to Growth Ratio||0.92|
Diebold provides integrated self-service delivery and security systems and services primarily to the financial, commercial, government, and retail markets worldwide. It offers self-service solutions, including automated teller machines, check-cashing machines, bulk cash recyclers, and bulk check deposit, as well as self-service software solutions consisting of various applications that process events and transactions; and self-service support services comprising installation and ongoing maintenance of products, OpteView remote services, availability management, branch transformation, and distribution channel consulting, as well as outsourced and managed services, such as remote monitoring, troubleshooting for self-service customers, transaction processing, currency management, maintenance services, and online communication services. The company also provides various security solutions, which include physical security and facility products, including pneumatic tube systems for drive-up lanes, vaults, safes, depositories, bullet-resistive items, and undercounter equipment; a range of electronic security products, such as digital surveillance, access control systems, biometric technologies, alarms and remote monitoring, and diagnostics; and security monitoring solutions comprising fire, managed access control, energy management, remote video management, and storage, as well as logical security. In addition, it offers strategic analysis and planning of new systems, systems integration, architectural engineering, consulting and project management services, as well as design and service for electronic security products; and elections equipment, networking, tabulation, and diagnostic software development, training, support, and maintenance services. Diebold, Incorporated sells its products through its sales personnel, manufacturers' representatives, and distributors. The company was founded in 1859 and is headquartered in North Canton, Ohio.
2) Ingles Markets Inc. (IMKTA)
|Price/Earnings to Growth Ratio||0.66|
Ingles Markets, Incorporated operates a supermarket chain in the southeast United States. Its supermarkets offer food products, including grocery, meat and dairy products, produce, frozen foods, and other perishables; and non-food products, such as fuel, pharmacy products, health and beauty care products, and general merchandise, as well as provides private label items. The company's stores also offer products and services, such as home meal replacement items, delicatessens, bakeries, floral departments, video rental departments, and greeting cards, as well as a selection of organic, beverage, and health-related items. In addition, it engages in the fluid dairy processing and shopping center rental businesses. The company operates 203 supermarkets, including 74 in Georgia, 69 in North Carolina, 36 in South Carolina, 21 in Tennessee, 2 in Virginia, and 1 in Alabama. As of September 24, 2011, it operated 74 in-store pharmacies and 70 fuel centers; owned and operated 70 shopping centers of which 58 contain an Ingles supermarket; and owned 94 additional properties that contain a free-standing Ingles store; and owned 13 undeveloped sites. The company was founded in 1963 and is headquartered in Black Mountain, North Carolina.
3) AEGON N.V. (AEG)
|Price/Earnings to Growth Ratio||0.65|
AEGON N.V. (AEGON) is a holding company that, through its member companies that are collectively referred to as AEGON or the AEGON Group, operates as a life insurance and pension company. The Company's businesses focus on life insurance, pensions, savings and investment products. The AEGON Group is also active in accident, supplemental health, general insurance and some limited banking activities. The Company's major markets are the United States, the Netherlands and the United Kingdom. In addition, AEGON operates in over 20 other markets in the Americas, Europe and Asia. The AEGON Group has four geographic segments: the Americas (which include the United States, Canada and Mexico), the Netherlands, the United Kingdom, and Other Countries, which include Hungary, Spain, Taiwan, China, Poland and a number of other countries with smaller operations. In December 2007, AEGON USA acquired 100% of the shares of Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York.
4) VimpelCom Ltd. (VIP)
|Price/Earnings to Growth Ratio||0.65|
VimpelCom Ltd., a telecommunications service operator, provides voice and data services through a range of traditional and broadband mobile and fixed technologies. It provides its services under the Beeline, Kyivstar, djuice, banglalink, Mobilink, Telecel, Leo, Djezzy, Wind, and Infostrada brands. The company also offers roaming services that allows its subscribers and the customers of other mobile operators to receive and make international, local, and long distance calls while outside of their home network. In addition, it provides mobile telecommunications, as well as fixed-line, data, and long distance licenses; and sells equipment and accessories. As of December 31, 2011, the company had approximately 205.2 million mobile subscribers. It offers its services in the Russian Federation, Italy, Algeria, Kazakhstan, Ukraine, Pakistan, Bangladesh, Armenia, Tajikistan, Uzbekistan, Georgia, Kyrgyzstan, Laos, the Central African Republic, Burundi, Canada, Zimbabwe, Vietnam, and Cambodia. VimpelCom Ltd. is headquartered in Amsterdam, the Netherlands.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/24/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.