Monthly Archives: June 2010

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

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By Robert Hauver

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.

The Top 5 Foreign Dividend Paying Stocks For 2010

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By Robert Hauver

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 British 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 a French and British firm: 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.

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

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By Robert Hauver

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.

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

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By Robert Hauver

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.