3 Strong Mid-Cap Buys
Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors should be excited when they find attractive investment opportunities. They should start by utilizing screening to select stocks. Then, they should dig deeper into each opportunity to determine its attractiveness and suitability for their portfolios. This time, I am looking for cheap, but high growth mid-cap stocks, which are paying high dividend yields to shareholders. I use the Motley Fool CAPS screen with four main criteria: (1) the market capitalization is between $1 billion - 10 billion, (2) EPS growth rate for the last 3 years is more than 10%, (3) dividend yield is greater than 5%, and (4) its P/E ratio is less than 5x. Here are the top 3 opportunities:
Cliffs Natural Resources (NYSE: CLF) is a large global producer of two main minerals: iron ore and metallurgical coal. The company is operating different iron ore mines in the US, Eastern Canada, and Western Australia. In addition, it has five metallurgical and one thermal coal mine in the US. The company’s shareholders have had a quite roller coaster ride in the past 5 years, as the share price has experienced a great deal of volatility. The highest and the lowest point are $111 and $13 in the 5-year period. Indeed, CLF has a beta of 2.38, meaning that the stock is 238% more volatile than the average stock market. CLF is trading at $36.27 per share; the total market capitalization is $5.20 billion. Its TTM P/E is only 3.7x. The company is paying investors 6.9% dividend yield. Its EPS has grown more than 76% in the past 3 years.
Pitney Bowes (NYSE: PBI) is the global software and hardware supplier for communication channels. The business is divided into two main business groups with similar revenue contributions, the solutions for small and medium businesses and the solutions for enterprise businesses. The largest contribution of revenue was North American Mailing segment, with more than $1.90 billion in 2011. PBI’s stock price has experienced gradual decline since 2008, from $46 to $14.36 per share. However, it has kept paying increasing dividends over time. Its quarterly dividend is 37.5 cents per share. The dividend yield is 10.5%. For the past 3 years, the company has managed to grow its EPS at more than 18%. Its current TTM P/E is 4.2x and the total market capitalization is $2.88 billion.
YPF (NYSE: YPF) is a largest oil and gas company in Argentina, operating in both upstream and downstream segments, with the main operation in Latin America. As of December 2011, the company estimated to have the proved reserves of around 1 billion BOE, consisting of 585 mmbbl of oil and 2,400 bcf of natural gas. Previously, YPF was the subsidiary of Spanish Repsol YPF, but Argentine government has nationalized it with a 51% stake in May this year. Interestingly, in June, the richest man in the world, Carlos Slim, has acquired 8.4% stake in YPF. Currently, YPF is trading at $10.92; the total market capitalization is nearly $4.3 billion. In the last 3 years, its EPS has grown 15%. The market is valuing YPF at 4.1x P/E. The dividend yield is 15.4%. The dividend seems to be rich. However, after being nationalized by Argentina government, the company would drastically cut dividend. It would only pay out $66 million, equivalent to 5.7% payout ratio.
My Foolish Take
Investors need to dig deeper into each particular opportunity to find the suitable investments themselves. CLF is a commodity manufacturing company so its performance would be tied to the commodity prices. YPF has cut its dividend drastically in 2012 going forward. PBI’s performance has been declining due to its reliance on shrinking mailing services business. Nevertheless, investors might follow Carlos Slim by buying YPF as a small position their portfolios to leverage the advantage of the biggest oil/gas company in Argentina. If they can ride through the extreme volatility of the market, they can invest in CLF for its good growth and high dividend yield.
hoangquocanh has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.