6 Dividend Stocks Cramer Is Pretty Bullish About

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Includes: AEP, ETP, SLRC, SNY, VZ, WIN
by: Efsinvestment

With Greek and Italian governments gone, Europe is starting to signal a colossal collapse to complete uncertainty. It is vital for the new governments to take some reassuring steps to reverse this situation as soon as possible. During this chaotic market environment, investors should look for high-yielding stocks that are offering safe returns.

OIn November 9th, Jim Cramer gave names of six companies that are offering investors almost risk-free returns with appetizing dividends. I have examined all of his stock mentions from a fundamental perspective, and added my opinion about them. I have applied my O-Metrix grading system where appropriate, as well. Here is a fundamental analysis of these stocks from Cramer's Mad Money:

Stock Name

Ticker

O-Metrix Score

My Take

Windstream Corp.

(NASDAQ:WIN)

2.04

Avoid

Verizon Communications

(NYSE:VZ)

3.82

Buy

Solar Capital

(NASDAQ:SLRC)

6.42

Buy

Energy Transfer Partners

(NYSE:ETP)

3.62

Buy

American Electric Power

(NYSE:AEP)

4.09

Buy

Sanofi-Aventis

(NYSE:SNY)

2.07

Hold

Data obtained from Finviz/Morningstar, and is current as of November 9 close. You can download the O-Metrix calculator here.

Windstream vs. Verizon

Cramer likes Windstream, but he stated that Windstream’s dividend is “the least safe.” Therefore, he recommends Verizon for investors looking for a safer play. Here is a brief comparison of these two stocks:

Current as of November 9 close.

Windstream

Verizon

P/E ratio

22.8

14.8

Forward P/E ratio

13.7

14.5

Estimated EPS growth for the next 5 years

-1.0%

5.8%

Dividend yield

8.48%

5.42%

Profit margin

6.4%

6.5%

Gross margin

61.7%

59.2%

Upside movement potential

20.1%

5.6%

Windstream returned -11.8% in a year, while Verizon returned 12.2%. O-Metrix scores of Windstream and Verizon are 2.04 and 3.82, respectively. Windstream is currently trading 10.72% lower than its 52-week high, whereas Verizon is trading 1.40% lower. Morningstar gives a two-star rating to Windstream, and a three-star rating to Verizon. Windstream is in my dividend danger zone list, so I would avoid that. Moreover, Windstream is in serious debt. Verizon, on the other hand, is a portfolio booster for the retiree.

Solar Capital

Cramer is bullish on Solar Capital, as it is a buy at current levels, and sports a terrific dividend of 10.74%. The company, as of November 9, shows a trailing P/E ratio of 15.5, and a forward P/E ratio of 9.0. Analysts estimate a 5.0% annual EPS growth for the next five years. Profit margin (41.6%) crushes the industry average of 18.5%, while it pays a gorgeous dividend of 10.74%.

Solar Capital returned 0.9% in a year, and it has a remarkable O-Metrix score of 6.42. Insider transactions have increased by 47.47% in the last six months, whereas institutions hold 78.78% of the shares. SMA20, SMA50, and SMA200 are 6.53%, 8.40% and 2.76%, respectively. Debt-to equity ratio is 0.1, well below the industry average of 1.8. Earnings increased by 61.25% this year. This stock is a tremendous profit maker.

Energy Transfer Partners

Cramer defines Energy Transfer as a “"steady toll operator for moving oil and gas around." There’s a massive demand for new pipelines due to the recent oil and gas discoveries, and Cramer sees an opportunity here. The Texas-based company was trading at a P/E ratio of 12.5, and a forward P/E ratio of 19.1, as of November 9. Five-year annual EPS growth forecast is 3.1%. Profit margin (4.2%) is slightly higher than the industry average of 4.1%, and it boasts an 8.34% dividend.

Energy Transfer is currently trading 19.25% lower than its 52-week high, while it returned -15.6% in a year. O-Metrix score is 3.62, and its target price indicates about a 16.3% increase potential. Beta value is 0.65, whereas insider transactions for the last six months have increased by 20.08%. Sales rose by 32.90% this quarter. Morningstar gives a four-star rating to Energy Transfer, and average analyst recommendation is 1.7 (1=Buy, 3=Sell). Consider adding this stock to your portfolio.

American Electric Power

The Mad Money host believes that American Electric is “committed to paying out higher dividends”, which already offers a 4.89% dividend. The company, as of the November 9 close, has a P/E ratio of 10.2, and a forward P/E ratio of 12.0. Estimated annual EPS growth is 4.2% for the next five years. With a profit margin of 12.0%, and a dividend of 4.89%, American Electric is an attractive stock for dividend lovers.

Target price is $40.56, implying a 4.5% upside movement potential. O-Metrix score is 4.09, while it returned 5.5% in the last twelve months. Beta value is 0.52, whereas the stock is currently trading only 2.09% lower than its 52-week high. Institutions hold 67.06% of the shares. SMA50 and SMA200 are 2.57% and 7.48%, respectively. Yields are consistent, while debts are far from being a threat. Cash flow is doing quite good. Gross margin is 63.7%, and Morningstar gives a three-star rating to the stock. American Electric is a top utility stock for the next five years. I wouldn’t ignore such a profitable company.

Sanofi-Aventis

Cramer likes Sanofi as it is a defensive play, which does not need a growing economy. The healthcare company was trading at a P/E ratio of 16.3, and a forward P/E ratio of 7.9, as of November 9. Analysts expect the company to have a 1.0% annual EPS growth in the next five years. Although profit margin (13.4%) is below the industry average of 14.8%, Sanofi offers a juicy dividend of 4.02%.

The company is trading 17.92% lower than its 52-week high, while it returned -4.6% in a year. Target price implies a 31.0% upside potential, and O-Metrix score is 2.07. Institutions hold 7.81% of the shares. Operating margin is 12.9%. ROA, ROE, and ROI are 4.60%, 8.14% and 6.35%, respectively. While SMA50 is -2.10%, SMA200 is -5.97%.

On the other hand, Beta value is 0.89. Cash flow is doing admirably, and debts are way too far from being a threat. Earnings increased by 22.91% this quarter. Debt-to equity ratio is 0.3, way lower than the industry average of 1.0. Gross margin is 70.5%. Moreover, it has a four-star rating from Morningstar. Sanofi-Aventis is worth holding, but not buying.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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