Investing in dividend stocks is typically viewed as a long-term relationship. When a dividend stock offers yields that are moderate to high, an investor tends to hold on for both the reliability and added income. Knowing this, most people take care to find dividend stocks that will offer the most value for the long run. Along these lines, we searched for moderate-to-high yield dividend stocks that have a track record of profitability which further builds credibility for the company. To further the value of these dividend stocks, they all appear to be trading at a discount. We think you will enjoy viewing our list and making your own assessment.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue, very few can make very large profits with little investment.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A high P/E ratio for a firm generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
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.
We first looked for dividend stocks. We then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year fiscal EPS Growth Rate>10%). We then looked for companies that appear undervalued from a price-multiple perspective (P/E<10)(forward P/E<10). We did not screen out any market caps or sectors.
Do you think these stocks will trade at a higher valuation? Use our list along with your own analysis.
1) Vale S.A. (VALE)
|Industry||Industrial Metals & Minerals|
|Return on Assets||11.00%|
|Earnings Per Share Growth Rate||33.14%|
|Forward Price/Earnings Ratio||5.30|
Vale S.A. engages in the exploration, production, and sale of basic metals in Brazil and internationally. The company is also involved in fertilizers, logistics, and steel businesses. Its Bulk Material segment engages in the extraction of iron ore and pellet production, as well as operation of Brazilian northern and southern transportation systems, including railroads, ports, and terminals related to mining operations. This segment also includes manganese ore mining and ferroalloys activities. The company's Base Metals segment produces non-ferrous minerals, including nickel, copper, and aluminum; and is involved in aluminum trading, alumina refining, aluminum metal smelting, and bauxite mining activities. Its Fertilizers segment provides potash, phosphates, and nitrogen. The company's Logistic Services segment provides cargo transportation services for third parties through ships, ports, and railroads. In addition, Vale S.A. generates energy through hydroelectric power plants. The company was founded in 1942 and is based in Rio de Janeiro, Brazil.
2) Statoil ASA (STO)
|Industry||Major Integrated Oil & Gas|
|Return on Assets||10.78%|
|Earnings Per Share Growth Rate||107.38%|
|Forward Price/Earnings Ratio||9.22|
Statoil ASA, an integrated energy company, engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products in Norway and internationally. The company is involved in the exploration, development, and production of crude oil and natural gas, as well as extraction of natural gas liquids. It also transports and markets natural gas and natural gas products; and engages in petroleum refining operations, as well as marketing crude oil and refined petroleum products. In addition, Statoil ASA engages in the retail sale of stationary energy primarily heating oil, kerosene, liquefied petroleum gas, and heavy fuel for industrial purposes; marine fuel comprising marine gasoil and heavy fuel; and aviation fuel, lubricants, and chemicals. Further, it builds and operates offshore wind farms in the United Kingdom off the Norfolk coast. As of December 31, 2011, the company had proved reserves of 5,426 million barrels-of-oil equivalent, including 2,276 million barrels of oil and 3,150 billion cubic meters of natural gas. It also had a network of 2,305 fuel stations comprising 1,739 fuel stations located in Denmark, Norway, and Sweden; and 566 in Poland, Latvia, Lithuania, Estonia, and Russia. The company was formerly known as StatoilHydro ASA and changed its name to Statoil ASA in November 2009. Statoil ASA was founded in 1972 and is based in Stavanger, Norway.
3) AstraZeneca PLC (AZN)
|Industry||Drug Manufacturers - Major|
|Return on Assets||15.72%|
|Earnings Per Share Growth Rate||31.13%|
|Forward Price/Earnings Ratio||8.01|
AstraZeneca PLC engages in the discovery, development, and commercialization of prescription medicines for gastrointestinal, cardiovascular, neuroscience, respiratory and inflammation, oncology, and infectious diseases worldwide. Its principal products include Atacand for hypertension and heart failure; Crestor for managing cholesterol levels; Nexium for acid reflux; Losec/Prilosec for the treatment of acid related diseases; Seloken/Toprol-XL for hypertension, heart failure, and angina; Seroquel IR for schizophrenia and bipolar disorders; and Seroquel XR for schizophrenia, bipolar disorder, and major depressive disorders. The company principal products also comprise Symbicort for asthma and chronic obstructive pulmonary diseases; Synagis for RSV, a respiratory infection in infants; and Zoladex for prostate and breast cancer. In addition, it has 86 pipeline projects, which include 79 projects in various clinical phases of development and 7 approved or launched projects. The company markets its products primarily to primary care and specialist doctors through distributors or local representative offices. AstraZeneca PLC has a strategic partnership with KNODE Inc. for the development of web-based solution; and a strategic alliance with Regulus Therapeutics, LLC to discover, develop, and commercialize microRNA therapeutics. The company was formerly known as Zeneca Group PLC and changed its name to AstraZeneca PLC in April 1999. AstraZeneca PLC was founded in 1992 and is headquartered in London, the United Kingdom.
4) Sasol Ltd. (SSL)
|Industry||Major Integrated Oil & Gas|
|Return on Assets||15.07%|
|Earnings Per Share Growth Rate||23.77%|
|Forward Price/Earnings Ratio||7.76|
Sasol Limited operates as an integrated energy and chemicals company worldwide. It mines saleable coal; distributes and markets natural gas and methane-rich gas; owns, operates, and maintains cross-border natural gas pipeline; produces coal-based synfuels; and markets oil products, such as petrol, diesel, jet fuel, illuminating paraffin, naphtha, liquid petroleum gas (LPG), fuel oils, bitumen, motor and industrial lubricants, and sulphur to the industrial and licensed wholesalers customers in South Africa. The company also supplies ethylene, propylene, polyethylene, polypropylene, polyvinyl chloride, chlor-alkali chemicals, and mining reagents; solvents, co-monomers, acrylates, and associated products; surfactants, linear alkylbenzene, surfactant intermediates, n-paraffins, n-olefins, C6-C22 alcohols, ethylene, oleochemicals, and other organic intermediates, as well as provides specialty aluminas, silica aluminas, and hydrotalcites. In addition, it produces and markets various chemical products comprising waxes, fertilizers, and mining explosive products; converts natural gas into synthesis gas for use as petrochemical feedstock; and involves in the research and development, alternative energy, and financial activities. Further, the company produces natural gas and condensate from the onshore Pande and Temane fields in Mozambique; oil in Gabon from the offshore Etame, Avouma, and Ebouri oilfield cluster; and shale gas from the Farrell Creek and Cypress A assets in Canada. It operates in South Africa, the other parts of Africa, Europe, North America, South America, Southeast Asia, Australasia, the Middle East, India, and the Far East. Sasol Limited was founded in 1950 and is headquartered in Johannesburg, South Africa.
5) Chevron Corporation (CVX)
|Industry||Major Integrated Oil & Gas|
|Return on Assets||12.70%|
|Earnings Per Share Growth Rate||41.78%|
|Forward Price/Earnings Ratio||9.14|
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. The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil and refined products primarily under the Chevron, Texaco, and Caltex names; transporting crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacturing and marketing commodity petrochemicals, plastics for industrial uses, and additives for fuel and lubricant additives. The company is also involved in coal and molybdenum mining operations; cash management and debt financing activities; insurance operations; real estate activities; and energy services, and alternative fuels and technology businesses, as well as manages interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts. The company was formerly known as ChevronTexaco Corporation and changed its name to Chevron Corporation in 2005. Chevron Corporation was founded in 1879 and is headquartered in San Ramon, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/27/2012.