3 Undervalued Foreign High Dividend Stocks

July 24th, 2010

If you’re looking for undervalued foreign dividend stocks with good growth prospects, our latest screen might interest you. We screened for attractive valuation metrics, such as, low Price/Free Cash Flow and PEG ratios, and high future EPS. We also screened for attractive ROE, ROI, ROA ratios, dividend stocks with a dividend yield above 5%, and low debt. This screen returned 2 Asian dividend paying stocks and 1 Latin American Telecom dividend stock, all of which are now in our High Dividend Stocks by Sector tables:

  • City Telecom HK  (CTEL): Provides integrated telecommunications services in Hong Kong via its own self-built fiber network. CTEL has a subsidiary, Hong Kong Broadband Network Limited (HKBN), that’s the fastest growing broadband service provider in Hong Kong. HKBN offers a diversified portfolio of innovative products that service over 1,027,000 subscriptions for broadband, local telephony and IP-TV services.  CTEL also has branch offices in Canada and Guangzhou. (Source: CTEL website)
  • Telecom Argentina (TEO): Based in Buenos Aires, TEO provides voice, data, internet, and wireless services to residential and corporate customers in Argentina.  For the three months ended 31 March 2010, TEO’s revenues increased 15% to P$3.25B. Net income increased 17% to P$411M. Revenues reflect an increase in revenue from Voice, Data & Internet segment and a rise in revenue from Mobile Telephony segment. Net income also reflects a decrease in amortization expenses, a fall in settlement charges, a decrease in bad debt expenses and higher gross profit margin.
  • Silicon Precision Industries (SPIL): Established in May 1984, SPIL has become one of the leading providers of comprehensive semiconductor assembly and test services. SPIL posted annual sales of US$1.81 billion in 2009 and currently employs around 17,000 people worldwide.  Products include advanced lead-frame and substrate based packages, which are widely used in, but not limited to, personal computers, communications, internet appliances, cellular phones, digital cameras, cable modems, personal digital assistants and LCD monitors.  Also based in Taiwan, with offices in China, Japan, Germany, and throughout the US. (Source: SPIL website)

All 3 firms have attractive Valuation metrics vs. the S&P500:

P/E PEG EPS Growth Next 5 Years Price/Free Cash Flow/Share Price/Book Price/Sales
SPIL 10.56 .53 20% 9.62 1.66 1.67
CTEL 11.16 .59 19% 5.70 2.25 1.82
TEO 9.41 .93 10% 7.89 2.40 1.11
S&P500 Avg 18.74 NA NA 20.40 3.35 2.27

Here are their Financial Ratios vs. the S&P500:

Dividend Yield ROE ROA ROI DEBT
SPIL 15.18% 16.14% 13.18% 15.84% NO DEBT
CTEL 5.47% 21.52% 13.03% 15.81% 0.13
TEO 4.98% 29.17% 14.30% 23.81% 0.15
S&P500 Avg 2.52% 18.68% 8.07% 10.01% 0.75

SPIL paid an annual dividend of $.401/share in July. Their most recent ex-dividend date was July 12, 2010.

CTEL pays semi-annual dividends in July and Dec-Jan.; their next ex-dividend date should be in early December. (They paid $0.413/share in Dec. 2009).

TEO paid an annual dividend of $.90 in May. Their most recent ex-date was April 30, 2010, which was their first dividend since 2001.

There are put options and call options available on CTEL and SPIL, but the yields on CTEL covered calls and cash secured puts are vastly superior.  Based upon today’s stock and option prices, CTEL currently sits atop our Covered Call Table, with an annualized static yield of over 45%.

CTEL also currently offers a very juicy cash secured put yield of over 32% annualized, currently the highest yield in our Cash Secured Put Table.

Disclosure: No positions at this time.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

5 Undervalued Basic Materials/Energy Dividend Stocks

July 16th, 2010

Are you looking for bargain basement dividend paying stocks with good earnings growth forecasts? Here’s a good place to start your search:

Our Stock Market Data page shows the Energy sector is off 8.65%, while the Basic Materials sector is down -8.43% year-to-date.  Additionally, our Market Cap/Style table shows that Large Cap Growth has taken the  biggest hit, dropping -3.92% YTD.  These two sectors have lagged way behind other industry sectors over the past year, as investors have  questioned the strength of the global recovery, and future demand.  If you believe that there will be steady or increased future demand for oil, natural gas, copper and the like, then you may want to research these 5 dividend stocks further.

We screened for low PEG ratios, strong next-year and next 5-year EPS growth figures, low Debt/Equity ratios, 3%-plus dividend yields.

The 5 stocks are: China Petroleum & Chemical (SNP), Chevron (CVX), Southern Copper (SCCO), Conoco Phillips, and Ensco (ESV):

Ticker

7/16/10 Price

Dividend Yield

P/E

PEG

EPS growth next year

EPS growth next 5 years

Total Debt/Equity

SNP

$76.96

3.35%

7.52

0.25

15.88%

29.70%

0.58

CVX

$72.07

3.94%

11.08

0.57

13.56%

19.60%

0.11

SCCO

$29.31

3.89%

20.54

0.71

38.29%

29.11%

0.33

COP

$52.09

4.16%

13.87

0.77

20.72%

18.05%

0.46

ESV

$40.63

3.36%

8.29

0.79

15.45%

10.50%

0.05

COP features the highest dividend yield of this group, currently at 4.16%, and is also in our High Dividend Stocks by sector tables.

Here are management and performance metrics, earnings dates, and volatility:

Ticker

ROE

ROA

ROI

Perform-ance (Year)

Perform-ance (YTD)

Earnings Date

Volatility (Month)

SNP

17.56%

7.78%

12.73%

-0.92%

-8.87%

4/29

1.64%

CVX

14.45%

8.09%

9.68%

17.45%

-3.32%

7/30

1.91%

SCCO

34.35%

21.83%

23.99%

41.99%

-6.70%

7/22

3.61%

COP

9.69%

3.88%

4.64%

32.22%

5.64%

7/28

2.34%

ESV

13.36%

11.11%

11.84%

10.88%

5.46%

7/22

3.56%

There are also puts and call options available on these stocks, for investors who want to hedge their investment via covered calls, or selling cash secured puts. In light of the upcoming earnings reports for 4 of these stocks, bid premiums may rise near earnings dates. Ensco (ESV), and Southern Copper (SCCO) have the highest % option yields, in keeping with their higher volatility.  In addition, Ensco, being a driller, is a rather contrarian pick right now, which also accounts for the high cash secured put bid premiums, (over 12%), for ESV in our Put Selling Table.  SCCO has even higher put options bid premiums, currently over 14%.

Disclosure: Author owns CVX shares.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | 2 Comments »

Cato Corp., (CATO), An Apparel Dividend Stock With Fashionable Option Yields

July 9th, 2010

Cato Corp., is a fashion specialty retailer which is listed in the Consumer Discretionary section of our High Dividend Stocks by Sector tables. They target value and fashion-oriented females, and operate over 1200 women’s fashion stores, primarily in the southeastern U.S. They just reported that same-store sales are up 5% year-to-date, and that June sales increased 1%.  In their last fiscal quarter, ending 5/01/10, their revenue rose 8.9%, and their net income jumped 44%.

This is a conservatively managed firm, with zero debt, and it fares well in our Industry Comparison Table:

CATO Apparel Industry
P/E 11.81 16.24
Price/Free Cash Flow 11.27 19.98
Price/Book 2.11 2.88
Debt/Equity NO DEBT 28.47%
ROE (TTM) 18.09% 3.66%
ROI (TTM) 17.14% 2.26%
Dividend Yield 3.33% 1.81%

There are attractive covered calls and cash secured put options trades available for CATO.

These two covered call trades yield from 14.7% up to a potential 34.9% annualized:

(July 8. 22, 2010 closing price) Dividends Pre-expiration Expi-ration month/Call Strike Price Call Bid Premium Total Static Yield (Annualized) Potential Assigned Yield (Ann’d) Total Potential Yield (Ann’d)
$22.56 $.37 Jan.2011/$22.50 $2.25 21.7% -.06% 21.01%
$.37 Jan.2011/$25.00 $1.40 14.84% 20.2% 35.19%

For more conservative investors, there’s also an attractive put option trade, with a 22%-plus yield and a lower break-even price, listed in our Put Selling Table.

CATO pays an $.185/share quarterly dividend, with their next ex-dividend date coming approximately Sept. 10th.  They have a 35% dividend payout ratio.

Disclosure: No shares held at this time

Disclaimer: This article is written for informational purposes only.

© 2010 DeMar Marketing. All rights reserved.

Bookmark and Share

Tags: , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

5 Defensive Utility Dividend Stocks

July 2nd, 2010

With the S&P down 12% and the Dow off nearly 10% in the 2nd quarter, you might well be thinking about defensive dividend stocks.  Comparing the various Industry Sectors over the 2nd quarter, the Utility sector has held up the best, dropping approx. 5.2%, vs. Basic Materials’ 17.2% loss.

We screened the Utility section of our High Dividend Stocks by Sector tables for dividend paying stocks with above-average ROE, ROI, ROA figures, and below-average Debt/Equity and P/E’s.

This search yielded 5 stocks, 4 from the US, and 1 from Brazil:

  • CPFL Energia (CPL) – A Brazilian electric utility based in Sao Paulo, that serves 6.6 million residential, industrial and commercial customers, mainly in the Sao Paulo and Rio Grande do Sul areas.  In 2009, they expanded into thermoelectric, biomass, and wind generation projects.  CPL has benefitted from the rapidly growing Brazilian economy. They pay 2 semi-annual dividends, with ex-dates in March and August.
  • Excelon Corp. (EXC) – A hybrid nuclear/natural gas utility, with customers in southeastern Pa. And northern Illinois. They’re the largest U.S. nuclear producer. (For more details, see our previous article about EXC.)  They pay $.525/share quarterly, with their next ex-dividend date coming up in August.
  • DPL Inc. (DPL) – DPL’s subsidiary, the Dayton Power & Light Co., is a regional electric utility that services all customer segments in west central Ohio.  They pay $.303/share quarterly, with their next ex-dividend date coming up in August.
  • Energy Inc. (EGAS) – A natural gas utility that distributes and sells to residential, commercial, and industrial customers in Maine, N. Carolina, Wyoming and Montana.   They pay $.045/share monthly.
  • AGL Resources (AGL) – An energy services holding company, that distributes natural gas in 6 eastern US states. AGL also owns natgas pipelines and sells telecom conduit and fiber optic cable.  They pay $.44/share quarterly, with their next ex-dividend date coming up in August.

Here’s how these 5 utility stocks stacked up vs. Utility Sector Averages:

CPL EXC DPL EGAS AGL Utility Sector Avgs.
DIVIDEND YIELD 6.39% 5.52% 5.05% 4.97% 4.93% 3.43%
ROE

25.88%

21.55%

21.53%

19.64%

13.28%

 11.65%
ROI

11.96%

6.07%

7.07%

13.31%

5.28%

 4.36%
ROA

8.34%

5.51%

6.34%

9.34%

3.99%

 3.87%
Debt/Equity

1.34

.97

1.14

 .77 1.16 1.43
OPERATING MARGIN

17.12%

28.72%

26.29%

15.82%

21.46%

 18.74%
P/E 13.80 9.17 11.98 6.03 11.67 17.27

There are covered call and put options available on EXC, DPL, and AGL.  With the market decline, put options are currently offering much higher bid premiums than call options. Many investors sell cash-secured puts, as an alternative to buying a stock outright, in order to decrease their risk, by achieving a lower break-even point.

Of these 3 stocks, Excelon currently has the most attractive yields for selling cash-secured puts, and is listed in our Covered Put table.

Disclosure: No positions at this time.

Disclaimer: This article is written for informational purposes only.

© 2010 DeMar Marketing.  All rights reserved.

Bookmark and Share

Tags: , , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

3 High Dividend Stocks with Low PEG Ratios & Good Growth Prospects

June 26th, 2010

If you’re looking for dividend paying stocks with good future EPS growth prospects and low P/E to EPS growth valuations, (PEG), here are 3 dividend stocks from our High Dividend Stocks by Sector tables:

United Online, (UNTD), and Himax Technologies, (HIMX), are both ranked high in our Technology High Dividend Stocks table, and Collectors Universe, (CLCT), has the highest current dividend yield in our Consumer Discretionary Dividend table.  CLCT also recently raised their dividend from $.25/share per quarter to $.30/share.

As you’ll see in the table below, all 3 of these stocks have PEG ratios well below 1, current dividend yields from 6.64% to over 9%, and are expected to have EPS growth of at least 15% over the next 5 years:

Ticker

Price

Dividend Yield

P/E

PEG

EPS growth next 5 years

UNTD

$6.02

6.64%

8.6

0.57

15.00%

HIMX

$3.02

8.28%

9.44

0.63

15.00%

CLCT

$13.10

9.16%

14.24

0.71

20.00%

Their valuation and mgt. effectiveness ratios vary widely, and their Debt/Equity ratios range from debt-free for 2 of the firms, to .72 for United Online:

ROE

ROI

Total Debt/Equity

Profit Margin

P/B

P/Free Cash per Share

UNTD

15.24%

7.97%

0.72

6.57%

1.23

8.58

HIMX

9.96%

9.03%

0

5.48%

1.26

8.01

CLCT

33.84%

29.10%

0

18.65%

5.57

3.30

There are call and put options available for UNTD and HIMX, but none for CLCT.

For investors looking for a lower entry point via selling cash-secured put options, Himax has the most attractive put-selling yield.  Selling cash secured puts currently offers a much better return than selling covered calls on either of these stocks.  Both of these trades are listed in our Covered Put Table.

Put Strike Price/Expiration Month Put Bid Premium Nominal Yield * Annualized Yield *
HIMX $2.50/Dec. 2010 $.20 8.00% 16.98%
UNTD $5.00/Dec. 2010 $.35 7.00% 14.85%

* Yields based upon 100% cash reserve.

Disclosure: No positions in these stocks at this time.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

The Top 5 Foreign Dividend Paying Stocks For 2010

June 18th, 2010

In our previous article, “The Top 5 U.S. Dividend Paying Stocks for 2010”, we identified the five U.S. dividend stocks which are projected to make the largest cash dividend payouts to shareholders in 2010.  This elite group included 2 Energy stocks, 2 Healthcare stocks, and a Telecom stock.

The top 5 foreign dividend paying stocks that we’ve identified include a Spanish bank, 2 Chinese and French telecoms, and 2 energy companies, from Holland, and France.  It turns out that 1 of these foreign Energy stocks is actually projected to pay out more cash dividends than any of the U.S. stocks.  All 5 of these foreign dividend stocks trade in the U.S. on the NYSE.

Topping this list is Holland’s Royal Dutch Shell, (RDS-A & RDS_B), both of which are major integrated Oil & Gas firms, that are active in the Upstream, Midstream and Chemicals segments of this business. Concerning risk, this group certainly has some.  The list includes Banco Santander, (STD), a conservatively run Spanish bank with a strong presence in Brazil, but a part of the ongoing Eurozone Sovereign debt crisis.

China Mobile, (CHL), has the second largest market cap of any Chinese/Hong Kong-based stocks traded on the NYSE, (PetroChina is the biggest), and offers mobile telecom and related services, mostly in mainland China.

The group is rounded out by two French firms: Total, (TOT), and Vodafone, (VOD).

Vodafone paid out $1.24/ADR share in 2 semi-annual payments in 2009.  They raised their summer semi-annual 2010 payout to $.812. The ex-dividend date was June 2nd.  Their next ex-date should be around Nov. 18th.  In 2009, this Nov. payment was $.448/ADR share, so, if it stays steady, VOD will pay out $1.26/ADR in 2010.  VOD’s current dividend yield is 6.1% on ADR shares.

Here’s the table for the Top 5 Foreign Dividend Stocks:

FOREIGN STOCKS

2010 PROJECTED PAYOUT (BLN$)

ANNUAL DIVIDEND/SHARE

Royal Dutch Shell (RDS/A & RDS/B)

$10.29

$3.36

Banco Santander (STD)

$8.16

$0.94

China Mobile (CHL)

$7.25

$2.11

Total (TOT)

$6.89

$3.09

Vodafone (VOD)

$6.58

$1.26

The other risk issue for investors involves foreign currency translation.  When currencies such as the Euro and the Dollar have big moves vs. each other, as we’ve seen in 2010, it will affect companies who conduct a large % of their business in foreign currencies.  As even many U.S. companies generate a lot of their revenue overseas, U.S. investors have been increasingly seeing the effects of foreign currency fluctuations and translations impact many firms’ profits, both foreign and domestic.

We’ve put together a table of Projected Upcoming ex-Dividend Dates and Quarterly Dividends/Share for these stocks. (Keep in mind, however, that none of the payouts listed below are confirmed as of yet, and the amounts can vary):

FOREIGN STOCKS

2010 PROJECTED Ex-Dividend Dates

PROJECTED Quarterly or Semi-Annual Dividend/Share

Royal Dutch Shell (RDS/A & RDS/B))

8/04/2010

$.84

Banco Santander (STD)

7/29/2010

$0.188

China Mobile (CHL)

9/10/2010

$0.868 (Semi-Annual)

Total (TOT)

11/9/2010

 $1.615 (Semi-Annual)

Vodafone (VOD)

11/18/10

$.448 (Semi-Annual)

Disclosure: Author has no positions at this time.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , , , , ,
Posted in Dividend Stocks | 2 Comments »

The Top 5 U.S. Dividend Paying Stocks for 2010

June 11th, 2010

Have you ever wondered which dividend paying stocks actually pay out the most money in cash dividends to their shareholders?  We posed this same question in 2009, in our article,           “The Top 5 Dividend Stocks for 2009”, a 3-part series, which identified the 5 firms who paid out the most cash to shareholders, and we explored various ways of investing in and profiting from these dividend stocks.

Four US firms made the top 5 list in 2009: AT&T, GE, Exxon, and Chevron.

In 2009, dividends were eliminated, or slashed by many venerable firms, due to the recession, particularly in the Financial  sector, which formerly accounted for over 20% of 2008 dividends paid out in the S&P, but shrank to paying out less than 10% of the total in 2009.

According to Standard & Poor’s, the average dividend yield in the Telecom Sector has taken the biggest jump so far in 2010, rising from 5.53% in 2009 to 6.29% this year, while the Financial sector has continued its yield decline, from a 2008 average yield of 4.44%, down to 1.22% in 2009, and down again to 1.14% in 2010.

The Telecom sector has many firms listed in our High Dividend Stocks by Sector tables.

Here’s how the Sectors average dividend yields and overall contributions to the overall S&P 500 ranked as of 5/26/10:

INDUSTRY SECTOR

SECTOR DIVIDEND CONTRIBUTION

SECTOR DIVIDEND YIELD

SECTOR DIVIDEND YIELD

5/26/2010

(As of 5/26/2010)

2009

Telecom Services

8.58%

6.29%

5.53%

Utilities

8.04%

4.75%

4.26%

Consumer Staples

17.57%

3.25%

2.96%

Health Care

13.29%

2.37%

2.03%

Energy

12.00%

2.35%

2.05%

Industrials

11.47%

2.28%

2.26%

Materials

3.42%

2.10%

1.76%

Consumer Discretionary

7.74%

1.53%

1.44%

Financials

8.82%

1.14%

1.22%

Information Technology

9.08%

1.02%

0.89%

S&P 500

100.00%

2.10%

1.95%

(SOURCE: Standard & Poor’s)

So, did any of the same top 2009 dividend paying stocks make it to the top 5 for 2010?

As it turns out, 3 out of 4 of these firms are poised to pay out even larger amounts of cash dividends in 2010.  As expected, GE, which cut its dividend in 2009 to $.10/quarter, from $.31/quarter, didn’t make the top 5 this year.

Here’s our list of the projected Top 5 U.S. Dividend Paying Stocks for 2010:

2010 Projected Payouts (in Billions$) Total Projected Annual Dividend/Share
AT &T  (T)

$9.92

$1.68
Exxon  (XOM)

$8.27

$1.76
Johnson & Johnson (JNJ)

$7.93

$2.11
Pfizer (PFE)

$5.81

$0.72
Chevron (CVX)

$5.79

$2.88

We’ve also compiled a list of projected upcoming ex-dividend dates and quarterly payouts/share for these Top 5 dividend stocks.

Projected Upcoming Dividend Dates Projected Quarterly Dividend/Share
AT &T  (T)

7/2/2010

$.42
Exxon  (XOM)

8/11/2010

$.44
Johnson & Johnson (JNJ)

8/27/2010

$.54
Pfizer (PFE)

8/5/2010

$0.18
Chevron (CVX)

8/17/2010

$.72

A looming issue for dividend investors is the status of the qualified dividends tax rate, which is currently at 15% until the end of 2010.  If Congress lets this tax rate simply expire, dividends could be taxed at the old 39.6% rate, which may very well inspire some dividend paying stocks to increase their payments in the fourth quarter, in order to still achieve the lower tax rate.

Disclosure: Author currently holds shares of XOM, T, and CVX.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , ,
Posted in Dividend Stocks | No Comments »

Goldman Sachs, (GS) – Two Contrarian Bullish High Yield Covered Call & Put Options Trades

June 3rd, 2010

Although Goldman isn’t one of the High Dividend Stocks that we normally cover, some investors may want to consider making a bullish options trade on them, by selling covered calls or cash-secured put options.  Either of the following 2 trades will deliver a substantially lower break-even entry point that’s below GS’s long-term moving averages.

Another consideration is Goldman’s current valuation.  With their recent closing price of $144.83, GS has some pretty attractive valuation metrics already, compared to its competitors:

Ticker

P/E

PEG

P/S

P/B

P/Cash

P/Free Cash Flow

Goldman Sachs

6.04

0.67

1.38

1.02

2.75

2.16

Deutsche Bank

5.75

1.15

1.06

0.75

2.98

1.62

Jeffries

15.44

1.63

1.48

1.74

19.77

1.83

JP Morgan

15.39

1.97

2.17

0.95

5.01

1.78

Morgan Stanley

93.72

9.76

1.08

0.79

6.35

8.64

AVERAGE

32.575

3.6275

1.4475

1.0575

8.5275

3.21

Their PEG ratio of .67 would be attractive compared to most industries, and their Price to Cash and Price/Free Cash Flow are also solid for their peer group, not to mention the outsized earnings they’ve been reporting recently.  However, many investors would be quite leery of being long such a controversial stock, given the recent “Main St. vs. Wall St.” backlash in DC, and the ongoing financial reform legislation hearings in Congress.  With that in mind, here are 2 ways to hedge your bet on Goldman:

Here’s a Covered Call trade that has a break-even of $125.13:

Stock Price Dividends Pre-Expiration Call Strike Price/Expir-ation Month Call Bid Premium Static Yield (Call + Div.) Static Yield Annual-ized Total Potential

Assigned Yield Annual-ized
$144.83 $.70 $145/Jan.2011 $19.00 13.6% 21.3% 21.4%

This Cash-Secured Put Selling trade has a break-even of $128.03 :

Stock Price Put Strike Price/Expir-ation Month Put Bid Premium Put Yield Put Yield Annual-ized
$144.83 $140/Jan.2011 $16.80 12% 18.7%

(Put Yield is based on 100% Cash Reserve)

The break-even points on both of these trades are also considerably below analysts’ current estimates for Goldman, which range from $160.00 to $235.00.

Of course, in addition to the “moral hazard” debate about GS, there are many other issues and questions involving Goldman: does the SEC have a strong case; will the Feds make Goldman a sacrificial lamb for political reasons; and, moreover; will the final version of the financial reform legislation seriously impact their earnings.  One final thought: It wasn’t so long ago that a certain savvy investor from Omaha bet on Goldman, when their future and their competition’s futures looked a lot grimmer than they seem to look now.

Disclosure: Author is short GS puts.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

Excelon (EXC) – A Utility Dividend Stock With Steady Growth Prospects

May 28th, 2010

Excelon, (EXC), is one of many dividend paying stocks in the Diversified Utility stocks sub-group, but what sets EXC apart from its peers are its abundant superior management, valuation and growth metrics, in addition to its wide moat within the reemerging nuclear energy production arena.  Exelon delivers electricity to approximately 5.4 million customers in northern Illinois via ComEd and southeastern Pennsylvania via PECO, as well as natural gas to 486,000 customers in the Philadelphia area via PECO. (EXC is listed in the Utilities section of our High Dividend Stocks by Sector tables).

With the BP Gulf disaster in the news every day, proven alternative energy sources are looking more attractive than ever. In a recent forum, Excelon CEO John Rowe called for the Senate to pass the pending energy bill that would put a price on carbon emissions, stating, “As the nation’s largest nuclear operator, Excelon also appreciates that the senators have recognized nuclear power as a low-emission source of baseload electricity, with an important role to play in the country’s transition to a low-carbon economy”.

As the lowest carbon emitter in the industry, Excelon stands to benefit from carbon cap and trade legislation.  EXC also created a new subsidiary in 2009, Excelon Transmission Co., which benefits from the expertise of former Federal Energy Regulatory Commission, (FERC) member Betsy Moler,  EXC’s VP of Gov’t Affairs and Public Policy.  Excelon’s website says that Ms. Moler led the FERC “landmark efforts  on open access and promoting competitive markets”. The subsidiary will focus on ways to capitalize on the expected $60 – $100 billion US investment in transmission over the next 10 years, such as moving “renewable  energy from the upper midwest and the Dakotas to population centers”, mitigating oversupply, improving reliability, and reducing congestion. (Source: Excelon website).

EXC’s two other divisions, ComEd and PECO, “will make up to $725 million in “smart grid” investments in Illinois and PA over the coming years”, and should give EXC a “regulated return on investment and stable earnings growth”.  PECO has already been awarded the maximum allowable grant of $200 million by the US Dept. of Energy for their current smart grid project in Philadelphia.

PECO has also filed for approvals to increase its annual electric and natural gas delivery revenues by $316 million and $44 million, respectively, beginning January 1, 2011.

Here are the figures of our Industry Comparison:

Excelon Diversified Utilities Group
P/E 9.38 16.23
Long-term EPS Growth 19.00% 5.00%
PEG 1.18 3.17
Profit Margin 16.09% 7.64%
Debt/Equity .97 1.30
Price/Cash 10.18 89.01
ROE 21.55% 9.96%
ROA 5.51% 2.86%
ROI 6.07% 3.38%
Dividend Yield 5.50% 5.01%

Excelon currently has a 50.58% dividend payout ratio, and pays a $.525/share dividend quarterly.  Their most recent ex-dividend date was May 12th, with a payout date of June 9th.

There are also options available for Excelon.  Our Covered Calls table currently lists the Jan. 2011 $40.00 call, which nets $2.25/share in call option premium and $1.05 in dividends. At Friday’s $38.74 price, your static/unassigned yield would be 8%. The break-even is $35.44.  If EXC rises to around $42.30 or higher, your underlying shares will most likely be assigned, giving you an additional $1.26/share profit, or 3%. The total assigned yield would be 11% for just under 8 months, or 17.7% annualized.

Investors looking for a lower entry point could sell cash-secured put options, and get a $34.40 break-even. The Jan. 2011 $37.50 put was bid at $3.10 today, which equals an 8% nominal yield, or 12.89% annualized.

Disclosure: No positions in EXC at this time.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

Linear Tech, (LLTC) – An Undervalued Tech Dividend Stock With Growth Potential

May 14th, 2010

If you’re looking for undervalued dividend paying stocks in the Tech sector, you may want to consider Linear Technology, (LLTC), a firm which designs, manufactures and markets integrated circuits in the Specialized Semiconductor sub-sector.  A recent addition to the Tech section of our High Dividend Stocks by Sector tables, LLTC currently has a 3.26% dividend yield, paying $.23/share quarterly.  You can also increase your yield on LLTC, via options trading strategies, such as selling covered calls or selling put options.

LLTC fares well in our Industry Comparison table:

LLTC Semiconductor Industry
P/E 22.24 28.30
Price/Cash Flow/Share 18.92 22.83

ROE

 45.01 10.74
ROA 18.55 8.06
ROI 49.37 9.65
Debt/Equity NO DEBT 19.30

LLTC also offers investors strong prospects for growth. In April, LLTC reported a 100% increase in net income of $.44/share, and a 55% jump in revenue.  Forbes reports that, LLTC’s “trailing 12-month earnings have already replicated its best ever four consecutive quarters”…”subsequent comparisons will necessarily moderate, but likely sustain 25 % to 30% or even higher rates of growth through 2012.” Indeed, using a baseline valuation method, even using a much lower growth rate of 15%, indicates an intrinsic value of $49.36.

Using the current consensus 2011 growth rate of 31% shows a PEG of just .74 for LLTC, which would also indicate that it’s undervalued.

More defensive, income-oriented investors may wish to hedge their bets on LLTC by selling covered calls.  However, they may miss out on a substantial upside gain.

Our Covered Call table lists the Jan. 2011 $30.00 call, which had a bid today of $2.20, an 11.5% annualized yield.  In addition, covered call sellers should receive two dividend payments of  $.23/quarter prior to the Jan. expiration, for a total payout of  $2.66/share.

The total static yield on this 8-month trade would be 9.4%, or 13.9% annualized.  The breakeven on this covered call trade is $25.52.

The potential assigned yield offers an additional $1.06/share, (3.79%), which could increase your total potential assigned yield to 13.29%, or 23.40% annualized.

Alternatively, if you wanted an even lower break-even point, you could sell cash-secured put options. Our Covered Puts table currently lists the Jan. 2011 $25 put, which was bid at $2.05 today, for an 8.2% yield in 8 months, or 12.07% annualized.

This would give you a $22.95 breakeven, which makes LLTC’s $.92/share dividend equate to a 4.1% yield. (These put-selling yields are based upon 100% cash reserve.)  LLTC closed today at $28.18.

Disclosure: No positions at this time.

Disclaimer: This article is written for informational purposes only.

Bookmark and Share

Tags: , , , , , , , , , , ,
Posted in Dividend Stocks, Option Trading | No Comments »

« Older Entries