11 Quality Dividend Value Investing Opportunities Near New Lows

by: New Low Observer

It was a good week for the market as the S&P 500 roared back 1.75%. The Dow did even better and closed at 12,657, up 1.95% for the week.

Our watch list now contains 30 companies within 11% of their respective 52-week lows. The complete list can be found here.

July 8, 2011 Watch List

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
CMA Comerica, Inc. 33.79 2.15% 18.57 1.82 0.40 1.18% 22%
NTRS Northern Trust Corp. 45.87 2.89% 16.93 2.71 1.12 2.44% 41%
BXS BanCorp.South Inc. 12.01 3.80% 75.06 0.16 0.04 0.33% 25%
GS Goldman Sachs 134.08 4.51% 14.69 9.13 1.40 1.04% 15%
BRK.A Berkshire Hathaway Inc. 115,050 4.66% 17.48 6580.82 N/A N/A N/A
GBCI Glacier BanCorp., Inc. 13.44 4.67% 22.78 0.59 0.52 3.87% 88%
AFL AFLAC Inc. 46.51 5.35% 10.48 4.44 1.20 2.58% 27%
NWN Northwest Natural Gas 45.93 5.42% 17.53 2.62 1.74 3.79% 66%
WABC Westamerica BanCorp. 49.7 5.95% 15.63 3.18 1.44 2.90% 45%
ANAT American Nat'l Insurance 78.74 6.20% 13.32 5.91 3.08 3.91% 52%

Watch List Summary

Northern Trust (NASDAQ:NTRS) came in second on our list this week. The shares are trading just 2.89% above the 52-week low. We had written an investment observation about this company back on September 2010 and feel that none of redeeming qualities have changed except the price and improved fundamentals. Since our last write up, the stock rose as high as 56.55, a gain of nearly 20%, but has retraced that level. We gave a sell recommendation on December 3, 2010 (Sell recommendation here) with a gain of 10.96% which was exactly half of the upside move, in accordance with Dow's theory.

Northern Trust (NTRS) is now trading below $47 but the fundamentals have gotten stronger. Net tangible assets rose from $6,369M in September 2010 quarter to $6,522M in March 2011 quarter. Credit Suisse shares our view with a recent report of five banks with strong capital level.

Fundamentals aside, the chart below () shows that $45 has been a strong support level for nearly 3 years. In addition, the price-to-book ratio (P/B) is close to its historical low range. Northern Trust's P/B is even lower than it was at the December 2008 low.

Aflac (NYSE:AFL) is an insurance company we'd like to highlight this week. Currently trading at just 5% above its 52-week low, we believe prudent investors could gain good upside if shares return to their historical fundamental averages. The five year average P/E for AFL is 15.6. As one of the largest life insurance companies in Japan, the headline risk has pressured investors to only pay 10.5x earnings. Additionally, the 5-year average dividend yield is 1.8%. The current yield of 2.58% is a sign of great value. With a dividend payout ratio at 27%, we believe the safety of the dividend is very much intact.

C.H. Robinson (NASDAQ:CHRW), a third-party logistics company, was last on our Dividend Watch List on June 11, 2010. At the time, the company had some pretty unassuming numbers such as a P/E ratio of 27, dividend yield of 1.72% and a dividend payout ratio of 47%. Apparently, those unassuming numbers have translated into a stock price that has achieved a 38% gain over the last 13 months. However, the chart below () shows that the last seven months have been a challenge for new investors.

Something is compelling existing investors to sell whenever the stock price approaches $82 a share. This is despite the fact that the current trailing P/E ratio of 33 is only marginally higher than the 27 p/e ratio back in June 2010. C.H. Robinson also has impressive return on assets and return on equity of 20% and 34%, respectively.

Being in the transportation sector, the company’s fate is tied with the performance of the Dow Jones Transportation Average. Since the first Dow Theory signal that was provided in July 2009, the Transportation Index has led the way higher with each successive bull market confirmation. The most recent ability of the Transportation Average to attain an all time high bodes well for the remaining transportation stocks. The primary risk to the scenario of the Transportation Average going higher is that the Dow Jones Industrial Average do not confirm by making an all time high.

Our bias is towards securing the gains that have been accomplished for C.H. Robinson. While the upside seems unlimited, the gains achieved so far require seeking out clear value propositions from our most recent Dividend and Nasdaq 100 watch lists.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from July 9, 2010 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2010 Price 2011 Price % change
FRS Frisch's Restaurants, Inc 19.95 22.47 12.63%
DNB Dun & Bradstreet Corp. 67.46 76.04 12.72%
WMT Wal-Mart Stores, Inc. 49.43 54.08 9.41%
FII Federated Investors Inc 21.24 24 12.99%
XOM Exxon Mobil Corp. 58.78 82.42 40.22%



Average 17.59%





DJI Dow Jones Industrial 10,198.03 12,657.20 24.11%
SPX S&P 500 1,077.96 1,343.80 24.66%

In our view, it is important to learn from the past and thus we shall revisit what the news of Exxon (NYSE:XOM) was a year ago. The most compelling case we found was from an article featured in Barron's titled Buy Into the ExxonMobil Slide.

Collins Stewart's analyst, Katherine Lucas Minyard, called for a 40% upside and amazingly hit that mark (and more) in less than a year. Her research was very prescient and well timed. In her report, Minyard stated that based on historical P/E multiples, Exxon should be trading at $82 per share.

Moreover, just as we subscribe to the dividend yield theory, Minyard noted that "ExxonMobil's dividend yield is currently 3.1%, with a return to the 10-year average 2.2% implying a share price of $82". The stock closed at $82.42 on Friday July 8, virtually one year after Minyard's report was published.

Disclosure: I am long NTRS.

Disclaimer: On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.