5 Dividend Stocks Selling at a Discount
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In this article, I identify five stocks that, on a relative value and growth basis, are selling at a discount to their peers. These companies pay stable dividends that have substantial cash flow coverage and maintain competitive advantages over their peers. Use my analysis as a starting point for your own due diligence.
AT&T Inc. (NYSE: T): For AT&T, shares are trading around $30 at the time of writing, against their 52 - week trading range of $27.2 to $31.94. At the current market price, the company is capitalized at $179.5 billion. Earnings per share for the last year were $1.97, and it paid a dividend of $1.76, yielding 5.9%. AT&T is bringing all together the best for its customers, from revolutionary smart phones to next-generation sophisticated solutions. With the announcement of the Samsung's Galaxy Note, a phone/tablet hybrid for AT & T at Consumer Electronics Show, prospects for AT&T are optimistic. News from the media press room of AT&T confirms a series of new initiatives designed to help developers by incorporating a new API platform to ease 4G applications development with less time processing. The private ownership of resources and the use of markets and prices to coordinate and direct economic activity characterize encouraging projections for AT&T. The base capex for AT&T , Verizon (VZ) and BCE Inc. (BCE) is shrinking as a percentage of revenue resulting in an increased free cash flow for the company. AT&T conversely offers much more protection on dividends and has a higher paying dividend policy. AT&T likes the fact that there is a dividend ever year. AT&T and Verizon raised their dividends last year. Keeping all these essentials as a basis for evaluation AT&T is generating a lot of cash right now. AT&T is pushing up dividends and can cover its dividends based on its monetary potency. AT&T has a lot of money in the store for acquisitions and mergers to secure its dividend paying ability. I consider investors do their own diligence if they are willing to buy AT&T for its better dividend yield of 5.9% against BCE's 5.1%.
Verizon Communications Inc. (NYSE: VZ): Shares are trading around $39 at the time of writing, against their 52 - week trading range of $32.28 to $40.48. At the current market price, the company is capitalized at $110.41 billion. Earnings per share for the last year were $2.49, and it paid a dividend of $2, yielding 5.1%. Verizon has become a global leader in delivering innovative communications, information and entertainment. Verizon's postpaid and prepaid business seems healthy. The consumer and the enterprise business have grown for Verizon. The average revenue per user in the telecommunication industry is creeping up each quarter. The management goals involve sales targets and market share achievement. Under such a competitive global environment Verizon has managed to secure a higher operating margin of 22.35% versus 16.16% for AT&T . With a higher price to earnings ratio of 15.62 versus 15.37 the stock is definitely a buy for future price appreciation and dividend income. The gross margins for Verizon are pretty healthy. Within the next couple of years the consumer spending devices are going to drive Cap X for Verizon. I recommend that interested investors do their own due diligence if they are looking to buy Verizon for growth and income.
Duke Energy Corporation (NYSE: DUK): Duke Energy Corporation is one of the leading electric utilities companies in the United States making life better for millions of people every day by providing electric and gas services in a sustainable, affordable and reliable package. The stock traded at $21.32 at the time of writing and has a 4.7% dividend yield. Duke gained during the past 12 months. The stock has a market cap of $28.41 billion, P/E ratio of 15.43 and Total Debt/Equity ratio of 87.83. Earnings per share for the last year were $1.38. Julie Janson, president of Duke Energy Corporation will be the 2012 chair of the Cincinnati USA Regional Chamber's board of directors, the chamber announced today. With Julie's business acumen the prime focus and hands on approach would be to expand Duke Energy Corporation's customer base and to meet up investors expectations. The latest news from the media room announces the completion of solar projects for New Jersey's Central Region integrated by Duke Energy, Integrys Energy and Smart Energy. Future prospects and earnings potential for its investors seem promising. Investors should opt for Duke Energy Corporation's dividend yield of 4.7% versus no dividend yield in case of its competitor National Grid, a realistic price to earnings ratio of 15.43 versus 1002.31 and higher earnings per share of 1.38 versus 0.62.
CenturyLink, Inc. (NYSE: CTL): In trading last week, shares of CenturyLink, Inc. jumped above their 200 day moving average of $37.34 changing hands as high as $37.5 per share against their 52 - week trading range of $31.16 to $45.34. At the current market price, the company is capitalized at $23.14 billion. Earnings per share for the last year were $1.51, and it paid a dividend of $2.9, yielding 7.9%. CenturyLink designs and manufactures computer products include desktop and mobile work stations, LED monitors, and high end performance servers. For an investor this stock is a buy resulting in increased value of a portfolio during stock market correction. Its operating margin is 19.34% versus 16.16% of AT&T. Investors can consider adding the stock in their portfolio, considering the fact that it has a higher dividend of $2.9, or 7.9%, which is almost twice that of its competitor, AT&T. However the return on equity for the AT&T stock is far higher than that of Duke Corporation 10.54% versus 5.56%. Buy the stock to realize dividend income and gain from future price appreciation.
Philip Morris International Inc (NYSE: PM): Shares are trading around $73.26 at the time of writing, as against their 52 - week trading range of $56.16 to $79.96. At the current market price, the company is capitalized at $172.25 billion. Earnings per share for the last year were $4.71, and it paid a dividend of $3.08, yielding 3.9%. Philip Morris is one of the leading international tobacco companies with products sold in over 180 countries. In a market that is dominated by giant companies, British American Tobacco (BTI), Altria Group Inc. (MO) rivalry is likely to increase and push down pressure on adopting cost cutting strategies for Phillip Morris. The price to earnings ratio of Philip Morris is slightly below its rival British American Tobacco 15.54 versus 18.38. The earnings per share are almost identical for the two tobacco providers. However since the stock price has fallen recently investors should avoid the urge to cut and run. It may seem like the safe thing to do at the time, but the long-term risks of missing an upturn are even more dangerous. Individuals who have the financial resources to do so should use stock market declines as opportunities.
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