With presidential election politics behind us, we investors now turn to year end issues, while meanwhile considering what an extended Obama administration means to our investment portfolios. I like to start my thought process with those companies paying dividends, but love to find companies that may have something more going for them than merely an attractive yield.
Dividend stocks produce solid earnings irrespective of the performance of the large economy. I had a look at a few dividend paying stocks that may have a surprise up their sleeve, making them a bit more worth investing in: Archer Daniels Midland Company (ADM), Nike Inc. (NKE), AFLAC Inc. (AFL), United Bankshares Inc. (UBSI) and Nucor Corporation (NUE)
Archer Daniels Midland Company
Archer-Daniels-Midland Company manufactures and sells a broad line of products that can best be described as value-added food and feed ingredients. The company also engages in food commodities futures. It is a bedrock operator in North American agribusiness.
ADM data by YCharts
Archer Daniels Midland was recently quoted at $20.59 with a 52-week trading range of $25.02-$33.98. The company has a market capitalization of $17.78B. Its price earnings ratio is at 14.68 off of earnings per share at $1.84. The stock pays an annual dividend of $0.70 producing a yield of 2.60%. Payout ratio is at 37.00%. It also has a return on assets and return on equity of 3.05% and 2.10% respectively. Its current ratio for the most recent quarter is at 1.84.
In October Archer Daniels increased its stake in Australian food producer GrainCorp Limited to 14.9 percent and has announced it intends to move towards an amicable buyout. This move is expected to open up access to growing Asian economies and likely would start ADM on a 10-15 year expansion curve across Asia. Archer Daniels and GrainCorp are in early stages but both boards sound positive.
NIKE, Inc., together with its subsidiaries,has developed into an athletic gear icon. The company sells its products to through its retail stores and Internet sales, as well as independent distributors, licensees and sales representatives.
NKE Dividend Yield data by YCharts
Nike was recently quoted at $92.89 with a 52-week trading range of $85.10-$114.81. The company has a market capitalization of $41.14B. Its price earnings ratio is at 19.05 off of earnings per share at $4.79. The stock distributes an annual dividend of $1.44 producing a yield of 1.30%. Payout ratio is at 38.00%. It also has a return on assets and return on equity of 12.20% and 21.51% respectively. Its current ratio for the most recent quarter is at 2.95.
Nike stock fell 10% off a disappointing 1Q 2012 earnings report and has never really recovered. This is odd, because the company actually beat analysts predictions. Where the problems came was from disappointing numbers from Nike sales in China, and where most watchers pin their hopes for Nike's future growth. Meanwhile earnings have stabilized, costs are down, margins are up and future orders are increasing.
I expect Nike's China growth to broaden markedly, piggybacking on expanding NBA revenues as American basketball continues to expand its visibility in the world's most populated country. Nike also has been averaging double- digit dividend increases, and the company board is due for another one.
Aflac is a major insurer and provides supplemental health and life insurance.
AFL data by YCharts
Aflac was recently quoted at $49.44 with a 52-week trading range of $38.13-$50.46. The company has a market capitalization of $23.45B. Its price earnings ratio is at 8.24 off of earnings per share at $6.07. The stock pays an annual dividend of $1.32 producing a yield of 2.70%. Payout ratio is at 24.00%. It also has a return on assets and return on equity of 2.22% and 19.86% respectively.
The company has had a rock solid balance sheet while that 19.86% return on equity is nothing to sneeze at. Investors have been concerned about the company investment portfolio's exposure to Japan and the troubled Euro-zone bonds and sovereigns. However management has been steadily divesting itself from those troubled or unprofitable areas, while making larger investments in American bonds. Profits are accelerating and should continue to do so throughout 2013.
United Bankshares Inc.
United Bankshares, Inc operates 126 full service offices in West Virginia, Virginia, Northern Virginia, Maryland, southeastern Ohio, southwestern Pennsylvania, and Washington, D.C.
UBSI data by YCharts
United Bankshares was recently quoted at $23.70 with a 52-week trading range of $22.40-$30.91. The company has a market capitalization of $1.18B. Its price earnings ratio is at 14.33 off of earnings per share at $1.64. The stock attracts an annual dividend of $1.24 producing a yield of 5.20%. Payout ratio is at 56.00%. It also has a return on assets and return on equity of 1.065% and 9.22% respectively.
United has increased its dividend to shareholders for 38 consecutive years, but the problem has been a series of three disappointing quarterly earnings reports that have each missed analysts expectations and brought the stock down 20% in 2012. Despite the analysts disappointment, the bank is performing well. From its 3Q statement:
United's asset quality continues to outperform its peers. United's percentage of nonperforming loans to loans, net of unearned income of 1.53% at September 30, 2012 compares favorably to the most recently reported percentage of 2.93% at June 30, 2012 for United's Federal Reserve peer group.
Nucor Corporation, manufactures and sells steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.
NUE data by YCharts
Nucor was recently quoted at $40.49 with a 52-week trading range of $34.23-$45.75. The company has a market capitalization of $12.18B. Its price earnings ratio is at 25.54 off of earnings per share at $1.58. The stock pays an annual dividend of $1.46 producing a yield of 3.60%. Payout ratio is at 92.00%. It also has a return on assets and return on equity of 4.37% and 7.61% respectively. Its current ratio for the most recent quarter is at 2.29.
Nucor is taking a page from Delta Airlines (DAL) and buying into the fuel sources it needs. A huge cost of steel production is natural gas, and Nucor has made an agreement with natural gas driller Encana to drill and produce its own natural gas. The company expects this deal to procure low-cost gas for the steel maker for the next 20 years.