Do you love a "deal?" Do you want need to get paid by your
investments? If so, look no further.
dividend paying stocks
is a tried and true way to grow your portfolio. And when you can
, you're in a great position to make a decent profit.
This relatively simple strategy involves focusing on stocks
that are yielding more than the 10-Year U.S. Treasury note, while
also trading cheaply from a P/E to growth (PEG) standpoint.
Even after the impressive rebound for stocks since 2009, there
are still a number of industry leading companies that trade
rather cheaply. This has happened for a couple different reasons.
First, many investors have simply failed to re-invest in beaten
down industries, such as the U.S. auto sector. Other companies
have simply been overlooked because investors remain enamored by
high tech and growth stocks.
Market leading companies remain great ways to find "safe"
dividend paying stocks, but every once in a while the market
presents an opportunity to buy these stocks at very attractive
prices. That's what's happening with these four
Undervalued Dividend Stock #1: Dow Chemical (
Dow Chemical is definitely an "unsexy" business. Even still,
billionaire activist investor Daniel Loeb and his Third Point
hedge fund have a large stake in the chemical company, hoping to
shake up the company structure. In an effort to fight off Loeb,
Dow Chemical recently tripled its share buyback program and upped
its dividend payment by 15%. The company sports a diversified
revenue stream, generating money from petrochemicals, agriculture
Dow has paid a dividend for over thirty years. It's currently
paying a 3% dividend yield. Plus with a trailing P/E ratio of 13,
the stock is the cheapest among major peers, which include
Du Pont (
Huntsman Corporation (
. Its dividend yield also dwarfs these two competitors.
With a payout ratio that's only 37%, Dow has plenty of cash to
fund its dividend program. Additionally, the company's balance
sheet is rock solid, with cash equal to nearly 10% of its market
cap. Those traits make it clear that Dow is poised to continue
increasing its dividend payout.
Undervalued Dividend Stock #2: Lorillard (
The tobacco companies are cash flow generating machines. When
you think of cigarettes, you likely think of
. While Lorillard is less well known, it's the market leader in
menthol brand cigarettes. And it also has a strong presence in
electronic cigarettes - owning over half the market with its Blue
There's currently speculation that
Reynolds American (RAI)
and Lorillard could merge. A marrying of two of the largest
tobacco companies would be a big positive for shareholders.
Synergies for the deal could be as high as $400 million, which is
just under 10% of Lorillard's revenues. This would be money that
investors would no doubt see either via dividend increases or
additional share repurchases.
As far as its dividend goes, the 4.7% dividend yield is the
highest dividend yield of our four stocks. Its balance sheet is
one of the best in the business, with nearly $5 billion in cash.
That's over 25% of its current market cap. Despite the healthy
dividend, Lorillard shares trade at a reasonable 15-times EPS
estimates for 2014.
Undervalued Dividend Stock #3 General Motors
After its bankruptcy and government bailout in 2009, the media
was quick to call GM "Government Motors." However, as of the end
of 2013, the U.S. Treasury no longer held a stake in GM, ending
its over four year ownership. Shares have been almost flat over
the last three and a half years, during a time when the S&P
soared. But with the government now out of the picture, GM could
be set to move higher.
GM is also one of the newest high-income plays in the auto
industry. It just reinstated its dividend earlier this year and
paid its first dividend in six years. The yield of 3.5% is a bit
higher than top rival Ford. Plus, it's PE / Growth ratio (PEG) of
just 0.5 shows that GM stock is cheap relative to its growth
Undervalued Dividend Stock #4: Ford (F)
Unlike General Motors, Ford escaped the financial crisis
without the taint of bankruptcy. However, it's still managed to
underperform the top auto seller,
Toyota Motors (TM)
, over the last three years.
Ford reinstated its dividend in 2012 and is already offering
investors a 3.3% yield. That's only a 23% payout, well below what
General Motors is paying out in dividends. There's plenty of room
for management to double its
over the couple years. Earlier this year, Ford increased its
dividend payment by 30%.
Shares of Ford are cheap, trading at just 9-times trailing
EPS. Ford has more exposure than GM to the struggling European
market. However, as the economy there turns around, it should be
a big positive for the car maker. Ford's PEG ratio makes the
company another cheap auto stock that is offering an impressive
While no investment is a sure thing, buying undervalued
dividend stocks helps build in some downside protection. You'll
be able to collect dividends, and the low valuations of these
stocks should lead to capital gains. Simply put: buying
inexpensive stocks that have a history of rewarding shareholders
is a great way to build wealth.
Ian Wyatt has found 3 stocks that pay dividends so big - you
can retire on them.
The Wall Street Journal
calls them, "mega-dividends." These stocks have a history of
consistently RAISING their dividends… quarter after quarter. In
fact, one of these cash-cranking companies hiked its dividend
10-fold! So, if these ever-increasing payouts sound good to you…
Click here for all the details