Thursday, June 16, 2011

10 Dividend Growth Stocks With A Single Digit P/E

We all want to find the best value when we buy a stock. There are many ways people value a stock. Ultimately, true value is defined by future cash flows. The catch is no one knows exactly what the future cash flows will be. As a result, some go to great lengths to estimate future cash flows, while others use historical metrics to estimate cash flows or to compare stocks.

One of the oldest metrics used is the price earnings (P/E) ratio. It is calculated as the market value per share divided by earnings per share (EPS). A high P/E ratio infers that investors expect strong future earnings growth. Conversely, a low P/E suggests limited future growth. These are the companies that have historically been in a position to return large sums of cash to their investors as dividends.

This week week, I screened my dividend growth stocks database for ultra-low P/Es. Below are 10 dividend  stocks stocks with a P/E less than 10:

Chevron Corporation (CVX)
Yield: 3.1% | P/E: 9.8
Chevron Corporation is a global integrated oil company (formerly ChevronTexaco) that has interests in exploration, production, refining and marketing, and petrochemicals.

RLI Corp. (RLI)
Yield: 2.0% | P/E: 9.8
RLI Corp., based in Peoria, IL, provides selected property, casualty, and surety insurance.

Lockheed Martin Corp. (LMT)
Yield: 3.9% | P/E: 9.7
Lockheed Martin Corp. is the world's largest military weapons manufacturer and is also a significant supplier to NASA and other non-defense government agencies receiving about 93% of its revenues from global defense sales.

Microsoft Corporation (MSFT)
Yield: 2.7% | P/E: 9.5
Microsoft is the world's largest software company, develops PC software, including the Windows operating system and the Office application suite.

Archer-Daniels-Midland Co. (ADM)
Yield: 2.1% | P/E: 9.3
Archer-Daniels-Midland Co. is one of the world's leading agribusiness companies, with major market positions in agricultural processing and merchandising.

Chubb Corporation (CB)
Yield: 2.5% | P/E: 9.1
Chubb Corporation as one of the largest U.S. property-casualty insurers, Chubb has carved out a number of niches, including high-end personal lines and specialty liability lines coverage.

ConocoPhillips Co. (COP)
Yield: 3.7% | P/E: 8.7
ConocoPhillips Co. was formed in 2002 when Phillips Petroleum and Conoco merged and is now is the fourth largest integrated oil company in the world.

AT&T Inc. (T)
Yield: 5.7% | P/E: 8.7
AT&T Inc. provides telephone and broadband service and holds full ownership of AT&T Mobility (formerly Cingular Wireless). AT&T Corp. was acquired in late 2005 and BellSouth in late 2006.

Universal Corporation (UVV)
Yield: 5.1% | P/E: 7.0
Universal Corporation a leaf tobacco merchant and processor, buys, processes, packs, stores, ships, and finances leaf tobacco for sale to manufacturers of consumer tobacco products.

Nacco Industries, Inc. (NC)
Yield: 2.3% | P/E: 5.8
Nacco Industries, Inc. conducts business in the areas of lift trucks, housewares, and mining in the Americas, Europe, and the Asia-Pacific.

As with past screens, the data presented above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.

My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.

Full Disclosure: Long CVX, COP, T. See a list of all my income holdings here.

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Tags: [CVX] [RLI] [LMT] [MSFT] [ADM] [CB] [COP] [T] [UVV] [NC]