5 Underpriced Rapid-Growth Dividend Stocks

May 29, 2013 10:03 AM ETAFL, AMP, CB, CVX, XOM
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Who doesn't love dividends? Most investors can agree that dividends are usually a big plus for owning a stock. This is even more important in a low-interest environment, where fixed income is low yielding, rates on savings accounts and CDs is abysmal and the overall market dividend yield is forced downward. Currently, the S&P 500 dividend yield is well off historical averages, with a 1.9% average dividend yield, compared to the historical average of 4.4%.

We have found five dividend stocks that are underpriced (trading below the market P/E) and have safe dividends (all have a payout ratio of less than 40%). All five of the underpriced stocks below trade with price to earnings ratios of less than 15.5x, which is well below the market's near 20x P/E.

As well, the dividend yield on all of these stocks is in excess of 2%, and they all have been growing their dividend payments by at least 7.9% annually over the last five years.

Dividends can be a big part of portfolios during low interest rate environments and we have a special appreciation for dividend-paying stocks, but what makes these stocks even greater is the expectation that stock's underpricing will be realized and this will lead to a higher stock price.

Three of these companies are in the financial sector, with two being oil Supermajors. We'll start with the insurance/financial companies:

Aflac (AFL)
Ameriprise (AMP)
Chubb (CB)
Price to earnings 8.5 15.2 14.1
Dividend yield 2.6% 2.7% 2.0%
Dividend payout 22% 40% 28%
5-year dividend growth 10.8% 20.6% 7.9%
Years of dividend increases 30 9 48

AFLAC (AFL) provides supplemental health and life insurance, operating in the U.S. and Japan. Sales in Japan, after rising in the high single digits in 2012, are expected to be up by mid-high single digits in 2013. S&P

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