3 Growth Stocks With Decent Dividend Yields

Includes: ACE, BBY, COP
by: Bret Jensen
It looks like the risk trade is back on for Wednesday after better than expected earnings from Intel (NASDAQ:INTC) and IBM. The market is set to rally despite rising interest rates on European debt issuance with a restructuring of Greek sovereign debt looking more and more likely, and Spain next in line for a bailout by the end of year.
Although I think the market is set up for a significant selloff this summer. I continue to look for reasonable places to put some funds. There are just so many pieces one can write about the overvaluations on Cramer’s momentum picks, which to his credit have actually worked very well since the onset of QE2 but will be hit hard if we do hit the predicted pullback.

One thing I can say about writing about Cramer, his fans are definitely passionate and true believers. The only thing that elicits more comments in the investing universe is writing anything negative about Sirius Radio (NASDAQ:SIRI), whose fans provide a level of bile unequaled by any other equity around. I attribute this to one of three things.

  1. They love the service, and are just very passionate advocates for the company.
  2. They rode the stock from $5 in 2007 all the way down to under 10 cents a share, and now that they are 1/3 the way back to even, they will not tolerate any negative comments on their stock.
  3. At $1.80, it is one of the few stocks outside the pink sheets they can afford to buy a 100 share lot in.
But I digress, today’s column is on the finding companies that sell at reasonable valuations, are growing nicely, and provide a decent dividend yield. Here are three that meet these criteria:
ACE Limited (NYSE:ACE) - ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to commercial and individual customers worldwide. ACE was less impacted by the Japan earthquake that originally speculated. Its valuation is reasonable as it is selling at 10.5 times this year’s earnings and 9 times next year’s consensus. It has beat analyst’s estimates by a good margin in each of the last four quarters. It provides a decent 2.2% dividend yield as well.
Best Buy (NYSE:BBY) – BBY is selling near its 52 week low as it has seriously disappointed investors in two of the last four quarters. However, it is selling at an extremely low valuation given its growth prospects. Best Buy is selling at less than 9 times this year’s earnings and less than 8 times next year’s consensus. It is selling at the very bottom of its five year range measured by P/E, P/S, and P/CF. It also yields a little over 2%. Given its efforts to grow its appliance share in its stores, a large buyback program, and working with vendors to improve gross margins; I think the stock is a bargain over the medium and long term. It looks compelling at a price under $30.
Conoco Phillips (NYSE:COP) – Conoco Phillips is large vertically integrated energy concern. It is selling at a reasonable 10 times this year’s earnings and less than 9 times next year’s consensus. It has consistently beat earnings estimates over the last year, and estimates have consistently been raised for both 2011 and 2012 over the last ninety days. It has large and growing asset base in Canada, a low tax and friendly place to do business; especially compared with other large energy producing regions. Unless we get a major economic downturn, I believe the floor for oil prices has permanently shifted up. It has a dividend yield of 3.4%.

Disclosure: I am long BBY.