I screened the Standard & Poor's database of 5,600 stocks to
find very low-risk companies paying healthy dividends.
First, I searched for companies with little or no debt. Companies
with heavy debt loads generally produce lower earnings when
interest rates rise. Second, I looked for companies that pay
dividends, yielding at least 1%. Lower dividend yields add less
Standard & Poor's lists over 2,000 companies that pay a
dividend and have no debt. You can whittle the list down to just a
few by requiring your choices to have Value Line financial strength
ratings of A++, A+, and A, and by choosing companies with Standard
& Poor's earnings and dividends rankings of A+, A, and A-.
Using these two criteria and the two parameters explained above
(low debt, dividends), I came up with 20 companies that are solid
candidates to buy now. After perusing the list, two companies stand
) is one of the largest transportation and logistics companies in
North America. Founded way back in 1905, it provides multimodal
transportation services and logistics through a network of 250
offices in North America, South America, Europe, Asia, and
C.H. Robinson has contracts with 50,000 transportation companies,
including motor carriers, railroads, air freight and ocean
carriers. The company maintains the largest system of
transportation capacity in North America. In addition, C.H.
Robinson operates logistics services, such as fresh produce
transport, freight consolidation, and cross-docking.
The company has demonstrated steady growth during the past 15
years, with 14 increases in EPS (earnings per share) and dividend
increases in every year. Recent acquisitions and rising costs
slowed earnings growth in 2012, which caused CHRW's stock price to
decline to bargain levels.
I expect cost controls and cost savings from acquisitions to boost
EPS by 19% during the next 12 months ending March 31, 2014, after
rising 6% in the past 12 months. Sales will likely increase 11%,
same as a year ago.
At 17.6 times my forward EPS estimate of $3.40, and with a dividend
yield of 2.3%, CHRW's stock is clearly undervalued. CHRW shares
will likely rise to my sell price within one to two years.
FactSet Research Systems
) provides global economic and financial data to investment
professionals. The company combines data from hundreds of sources
into a single online information library, accessible from numerous
devices using a private network.
The network provides a direct, high-speed data link between
FactSet's mainframe computers and the client's personal computer or
network. The system allows users to download, search, and analyze
data in a variety of formats, including custom-designed reports.
Sales and earnings growth has continued unabated, because FactSet
is taking market share from competitors such as Bloomberg, Dow
Jones, Morningstar, and Thomson-Reuters. FactSet's first-class
customer service and unique data sets have become a big advantage.
The recent shift from bond mutual funds to stock mutual funds could
enable FDS to beat 2013 forecasts. The company derives more than
80% of revenues from the mutual fund industry.
Sales will likely increase 10% and EPS should rise 12% during the
next 12-month period ending February 28, 2014. At 18.8 times my
forward EPS forecast of 4.83 and with a dividend yield of 1.4%, FDS
shares are a little high. The company's superior sales, earnings,
and dividend growth warrants the higher valuation.
FactSet has paid dividends since 1999, and increased its dividend
more than 10% every year since 1999. I expect another hefty
dividend increase before mid-year. Buy FDS now.
Editor's Note: This article was written by J. Royden Ward of
Cabot Wealth Advisory
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