5 Attractively Priced Stocks with Growing Dividends
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Dividends can be very attractive in a low rate environment, such as the one we currently find ourselves in, where the Fed has vowed to keep target rates low through mid-2015. Worth noting is that dividend stocks are not without risks, however we look to limit risk by ensuring the companies can afford to pay dividends throughout an extended economic contraction.
We have identified five such stocks that pay a dividend yield over 4%. In addition to solid dividends, all of these companies have dividends that have grown 5% annually over the last five-years. These companies also appear to be cheap on a valuation basis, all trading with a PEG ratio less than 2.0.
Intel (NASDAQ: INTC), the mammoth chip maker, is expected to see 2012 revenues down 1.3% due to declining PC sales. Yet data center growth is forecasted to drive revenue growth of 1.3% for 2013. Intel pays a dividend yield of 4.2%, and has grown dividends at 6.5% annually over the last five years. The company's PEG ratio is the lowest of our five stocks mentioned here, at only 1.0. Even as the company trades in line with its peers, the opportunity for a 4%+ dividend is a better deal than most bonds. The company's potential growth rate also accounts for the its wherewithal to navigate a tricky tech market and pivot in an effort to offer new products amidst a slowing of PC sales. The company, however, did manage to post EPS of $0.60 for 3Q, versus $0.57 for the same quarter last year.
Intel saw six firms have over 3% of their 2Q 13 portfolios invested in the company, with Hawkins Capital having almost 15%. Big names were Jim Simons and Ken Fisher owning over 16 million shares and having at least 1.3% of their 13F portfolios invested; check out all the funds that love Intel.
Plains All American Pipeline (NYSE: PAA) is a transportation and storage company for crude oil and refined products. Plains appears as one of the cheapest stocks of our five with a PEG ratio of 1.2, but it also pays a robust dividend that yields 4.8%. The company has grown its dividend at 5.7% annually for the last five years. As well, the company is looking to break into natural gas liquids with recent acquisitions in the space, including the Canadian natural gas liquids business of BP PLC. Plains trades well below the likes of some of the other oil & gas transport companies at 9x earnings, while other top companies, such as Buckeye Partners and Energy Transfer Equity, trade above 25x.
Plains saw a couple top names lower their 1Q stake by over 30% each in 2Q: Chuck Royce and Jim Simons. The company was up 13% through 2Q, merely keeping pace with the S&P 500, leaving firms frustrated despite its attractive valuation. Interestingly, since then, the company has outpaced the S&P 500 by 10%.
Southern Copper (NYSE: SCCO) mines and smelts copper in southern Peru, Mexico and Chile. Southern Copper is a company that has continued to grow its dividend at a 5-year CAGR of 7.5% despite a global slowdown that has slowed copper demand. The yield on its dividend is 4.5%, and its shares trade at a PEG ratio of only 1.3. The company has managed to post strong results of late on the back of better copper volumes. Its shares are generally correlated with copper prices, and so a bullish outlook for copper as global demand picks up is positive for the company.
The top four fund owners by shares all increased their 1Q stakes by over 100% during 2Q. Namely, top funds invested included Ken Griffin and Jim Simons, who upped their stakes in Southern Copper by 100% and 900%, respectively.
Lockheed Martin (NYSE: LMT) is the world's largest military weapons manufacturer. Lockheed has grown its dividend the highest of our five stocks over the last 5-years at a 21% CAGR. The yield on the company's dividend is also the second highest of our five stocks at 5.0%. Lockheed recently posted 3Q earnings of $2.21, compared to $1.99 for the same quarter last year; check out our most recent Lockheed earnings analysis. Despite possible defense spending cuts, the company is up 15% year to date and saw its price target increased to $100 by S&P last month.
First Eagle Investment Management was the top fund owner invested in Lockheed at the end of June, with almost 4 million shares. On the other hand, a couple smaller firms had their funds heavily concentrated in First Eagle, including Chieftain Capital and Elm Ridge Capital, with 10.6% and 4.3% of their firm's 13F portfolio, respectively.
Vodafone (NASDAQ: VOD) pays the highest dividend of the bunch with a yield of 5.2%, and a solid 5-year dividend growth rate of 7%. The company has a PEG that comes in among the highest of our five stocks at 1.7, yet we believe that Vodafone also has some of the best growth prospects given the fact it has a horse in the mobile payments race. Vodafone not only makes this dividend list, but it is also a proud member of our 5 dividend monsters hedge funds love. However, Vodafone is seeing weakness in Europe. The mobile communications company expects to see European revenues down in fiscal year 2012, yet its emerging markets segment should see 7% growth. The company is also making synergistic acquisitions to fuel growth, including a cable and wireless acquisition that will allow the company to save on leasing from competitors. The company's solid growth prospects might also be overlooked by investors; shares currently trade at a trailing P/E of 12.5x but a forward P/E of 10.5x.
The top three fund owners by shares all gave Vodafone solid votes of confidence during 2Q. Top fund owner Arrowstreet Capital's position was an entirely new holding that made up 2.3% of the firm's 2Q 13F portfolio. As well, the two other top firms, Jim Simons and Michael Messner, upped their 1Q stakes by at least 50% each.
Intel's name is synonymous with the semiconductor, but savvy investors like yourself should constantly question whether there is a profit opportunity left from the stock. Thankfully, the Motley Fool has assembled a special report detailing the opportunity, risks, and Foolish bottom-line analysis on the company. Today, you can gain instant access to this report by simply clicking here now.
This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Intel and Lockheed Martin. Motley Fool newsletter services recommend Intel, Vodafone Group Plc (ADR), and Vodafone Group Plc (ADR). 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.