For Immediate Release
Chicago, IL – May 17, 2013 – Today, Zacks Investment Ideas feature highlights Features: Rogers Communications (RCI), Kohl's (KSS) and Chevron (CVX).
3 Dividend Stocks at Reasonable Prices
There's a new acronym gaining momentum in the investing world: FOBOR.
It stands for FOrced Buyers Of Risk. What it means essentially is that due to aggressive monetary policies by central banks, investors have basically been forced out of fixed income assets like bonds and into riskier assets like stocks.
Many of these FOBORs are institutional investors like pension funds that rely on steady income streams to meet their liabilities. And simply a sub-2% yield on a 10-year Treasury note isn't going to cut it. So they shift their money into high yielding - and riskier - assets.
Considering that the yield on the 10-year Treasury note is currently less than the dividend yield on the S&P 500, this move isn't surprising. Since 1962, this spread has averaged +3.54%, as you can see in the chart below:
The More Boring the Better
FOBORs are reluctant stock investors, so most prefer the lowest beta, most stable dividend stocks out there since they are used to the safety of bonds. This move has driven stock prices in many "boring" stocks to record highs.
Defensive Too Expensive?
Bubble might be too harsh of a word. But defensive stocks certainly look a little frothy here.
While low beta dividend stocks are becoming harder to find at a reasonable price, there are still some pockets of value out there.
3 Low Beta, Reasonably Priced Dividend Stocks
I ran a screen in Research Wizard that searched for the following criteria:
- Dividend yield greater than 2.5%
- Forward P/E ratio below 15
- Price to cash flow ratio below 10
- Beta less than 1
- A history of rising sales and EPS
- A history of rising dividends
- Zacks Rank of 3 (Hold) or better
Here are 3 of my favorite names from the list:
Rogers Communications (RCI)
Dividend Yield: 3.7%
Forward P/E: 14x
Price/Cash Flow: 7x
Rogers Communications is a Canadian communications and media company engaged in the telecom and media businesses. The company operates in three segments: Wireless, Cable & Business Solutions, and Media. Rogers generates strong and stable cash flows which it has used to increase its dividend at a 12% compound annual growth rate over the last five years.
Dividend Yield: 2.7%
Forward P/E: 11x
Price/Cash Flow: 6x
Kohl's operates 1,155 department stores in 49 states. The company has delivered steady sales and earnings growth over the last decade and began paying a dividend in 2011. Kohl's also recently delivered a big first quarter earnings beat that should drive analysts' earnings estimates meaningfully higher.
Dividend Yield: 3.3%
Forward P/E: 10x
Price/Cash Flow: 6x
Chevron is a global energy company primarily focused on the exploration and production of oil. Although the company is dependent on oil prices, which can be very volatile, Chevron has managed to increase its dividend at an 11% compound annual rate over the last 10 years and did not cut its dividend during the Great Recession.
The Bottom Line
Forced buyers of risk have driven valuations higher in many stable dividends stocks. But these three low beta stocks still offer strong yields at reasonable prices.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it’s your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298
Follow us on Twitter: https://twitter.com/ZacksResearch
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339
More From Zacks.com