Diebold – This Solid Dividend Stock Just Sent A Buy Signal

Posted on September 27, 2012

by Robert Hauver

It’s often been said that “timing is everything”, especially when buying stocks. We went looking for solid dividend paying stocks which might be on the verge of rising. We came up with Diebold, (DBD), which just crossed above the oversold line on its stochastic chart, an event which is seen as a buy signal by technical traders:

Company Profile: 150 years old, and based in Ohio, Diebold is a leading global supplier of ATMs, and holds the leading market position in many countries around the world. Diebold also provides security and facility solutions, software solutions, and cross-disciplinary functions which include both hardware and software capabilities, and provides professional and managed services, transaction processing, and security services. Diebold’s primary customers include financial institutions, as well as government agencies, commercial enterprises and various retail outlets. (Source: Diebold website)

Diebold hit its high for the year, at $42.25, back in April, and has struggled since, falling to the mid-30′s in the Spring pullback, and hasn’t participated much in the summer/fall rally until recently. However, it’s up over 2.5% over the past trading month.

Earnings Growth: After bottoming out with a -$.31/share loss in 2010, DBD came roaring back in 2011, and is estimated to grow over 15% in 2012. Analysts’ 2013 earnings estimates range from $2.65 to $3.00 for 2013, which gives DBD a higher 1.27 2013 PEG ratio.

However, DBD just beefed up its operations in Brazil, by acquiring GAS Tecnologia, a leading Brazilian Internet banking, online payment and mobile banking security company. It serves many of the country’s leading financial institutions and protects nearly 70 % of Internet banking transactions in Brazil. Internet banking services only cover about 30% of the transactions within Brazil currently, and are projected to double every 3 years.

Dividends: DBD has an impressive 5-year dividend growth rate of over 19%, and increased its quarterly payout to $.285 in the 1st quarter of 2012, from $.28:

Options: If you want to improve upon DBD’s dividend yield, there are reasonably attractive call options available. Here’s a trade from our Covered Calls Table, that offers an option premium which pays over 3 times DBD’s quarterly dividends between now and February expiration.

The minimum income you’d receive in this trade is $2.81/share, ($1.70 in call premiums, plus $1.11 in assigned price gain, if DBD rises over $35.00, and your shares get assigned before you receive either of the 2 quarterly dividends. The maximum income you’d receive is $3.37, if you receive both dividends, AND your shares are assigned. However, it’s more likely that, if your shares got assigned, after receiving the first $.28 dividend, you wouldn’t receive the second one, since DBD’s ex-dividend date may fall on February 15th, the same day as this option expires. Hence, you’d earn $3.09, a 9%-plus yield over this 5-month term:

Diebold also has put options available, but the premiums aren’t that compelling at present. (You can find over 30 high yield trades in our Cash Secured Puts Table.)

Financials: Diebold has an impressive ROE, but does carry a bit more debt than industry averages. However it has an 8.3 Interest Coverage ratio.

Disclosure: Author held no DBD shares at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

This Hot High Dividend Stock May Still Be Undervalued

Posted on September 14, 2012

by Robert Hauver

Our quest for undervalued high dividend paying stocks keeps leading us back to the Energy sector, which took a beating in the second quarter, but has come back strong since late June. In a previous article, we wrote about Pioneer Southwest Energy, (PSE), an energy stock which had been left behind in the summer rally.

This article focuses on Calumet Specialty Products Partners, (CLMT), an LP which is a combo oil & gas processor/refiner. With its 8%-plus dividend yield, CLMT is listed in our High Dividend Stocks By Sector Tables. Unlike PSE, CLMT hasn’t been left behind this summer, and has greatly outperformed the S&P since late June. It also looks closer to being overbought than oversold on its stochastic chart:

Undervalued Thesis: Thanks to a series of acquisitions, CLMT had great growth in 2011, and thus far in 2012, with 2012 EPS estimated at $3.34 on average, a torrid 151% pace. Its long-term 5-year growth projection of 26.81% gives it a very low 0.36 PEG:

Here’s the rub – analysts are currently estimating a -3.89% downturn in EPS for 2013:

But analysts may be underestimating the 2013 earnings impact of CLMT’s acquisitions, if the last 2 quarters are any harbinger of what’s to come. CLMT earned $0.97 in the first quarter, and increased to $1.14 in the 2nd quarter of 2012, an approximately 87% to 100% increase over the previous year’s quarters.

So, if CLMT matches the lower, $.97 1st quarter figure over the next 2 quarters, it would earn $4.05 in 2012, and probably even more in 2013, since it has made more acquisitions since the 2nd quarter, which will be accretive to earnings:

(Source: Yahoo Finance)

Using a risk-adjusted discounted rate of 8.37% vs. future earnings also shows CLMT to be undervalued, with a whopping value of $132.97.

Dividends: After paying its first 2 quarterly distributions of $.63 in 2007, CLMT’s payout slipped to $.45/quarter in 2008-2009, but has increased steadily ever since – $.46 in 2010, form $.47 up to $.50 in 2011, and from $.53 to $.59 in 2012.

Even though it still looks undervalued on a long term basis, given the big run that CLMT has had…

You may want to wait for a pullback, or, alternatively, sell Covered Calls, to achieve a lower break-even cost.

Here’s a trade for CLMT from our Covered Calls Table, which lists 30 other high yield trades:

This 5-month trade offers a few different income scenarios:

1. Static – Maximum income of $2.48, (dividends and call premium), if CLMT doesn’t rise above the $30.00 call strike price near its ex-dividend dates, or at expiration.

2. Assigned – Minimum income of $2.15, ($.85 price gain + call premium), if CMLT does rise above the $30.00 call strike price near its first ex-dividend date, and your shares are assigned. Maximum income of $3.33 if CMLT gets assigned at expiration, AND you collect both quarterly $.59 dividends.

CLMT also has put options available, but the only high yield is on a $30.00 strike price, which is above the current price/share.

Financials: CLMT has good Mgt. Efficiency ratios, but does carry more debt than industry averages. However, it has 4.1 Interest Coverage Ratio. Its Operating Margins should improve, as it integrates its acquisitions.

Company Profile: Calumet is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial, and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana and has nine facilities located in northwest Louisiana, northwest Wisconsin, western Pennsylvania, southeastern Texas and eastern Missouri. (Source: Calumet website)

Disclosure: Author had no positions in any of the stocks mentioned in this article at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

A High Dividend Stock That’s Ready To Rise

Posted on September 7, 2012

by Robert Hauver

Looking for cheap high dividend paying stocks? MV Oil Trust, (MVO), has shown a recurring pattern of price troughs that rise into peaks as it approaches its quarterly ex-dividend dates, which fall around the 12th of January, April, July, and October. It recently crossed back above the oversold line on its stochastic chart:

Dividends: With its 11%-plus dividend yield, MVO sits atop the Energy section of our High Dividend Stocks By Sector Tables. By law, trusts are required to pay out at least 90% of their income in distributions, in return for not paying taxes. MVO’s next ex-dividend date should be around October 12th. (Trust dividends are referred to as distributions.)

Dividend History: MVO will need to pay out at least $.76 in October, to keep pace with its 2011 payout level. Judging by its earnings, (see below), this should be achievable.

Earnings: MVO is one of only of a handful of energy trusts which had strong earnings growth in 2011, (up over 25%), and in the most recent quarter. As noted below, MVO earns royalties from assets which are 98% oil, vs. only 2% natural gas, hence its advantage over natural gas trusts, many of which had been hurt by plummeting prices.

Profile: MV Oil Trust was formed in August 2006, by MV Partners, LLC. MV Partners conveys a term net profits interest to the trust that represents the right to receive 80% of the net proceeds from all of MV Partners’ interests in oil and natural gas properties, which are located in the Mid-Continent region in the States of Kansas and Colorado. As of June 30, 2006, the underlying properties produced predominantly oil from approximately 985 wells, and the projected reserve life of the underlying properties was in excess of 50 years.

Production from the underlying properties for the year ended December 31, 2005, was approximately 98% oil and approximately 2% natural gas and natural gas liquids. The underlying properties are all located in mature fields that are characterized by long production histories and numerous additional development opportunities to help reduce the natural decline in production from the underlying properties.

The net profits interest will terminate on the later to occur of (1) June 30, 2026, or (2) the time when 14.4 MMBoe have been produced from the underlying properties and sold (which amount is the equivalent of 11.5 MMBoe in respect of the trust’s right to receive 80% of the net proceeds from the underlying properties pursuant to the net profits interest).

Options: There are no put options or call options available for MVO.

Disclosure: Author had no positions in any of the stocks mentioned in this article at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

3 Basic Materials Dividend Stocks Trouncing The Market

Posted on July 28, 2012

By Robert Hauver

Basic Materials had been getting pummeled in 2012, for a number of reasons, chiefly the slowdown in the world economy, particularly China, and a strong dollar. This sector is the worst performing sector so far, down 0.6% in 2012:

However, over the past month, this sector has outperformed all others, thanks to a falling dollar, and renewed stimulus from the Chinese government. Click here to read more…

Worthington Industries Is On A Roll

Posted on July 13, 2012

by Robert Hauver

Looking for dividend stocks with market support?

Steel and Metal processor Worthington Industries, (WOR), has been on a roll since the June 4th lows, rising over 42%, vs. the S&P, which has gained approx. 6%. This dividend stock has done better than the Steel & Iron industry, which is up approx. 4% since June 4th, but is still down 9% for the year, vs. WOR’s big 36.72% gain:

Earnings Growth: A big part of the attraction for WOR stems from its EPS growth figures, which show it to still be undervalued on a PEG basis for next year’s earnings: Click here to read more…

Disclosure: Author had no positions in WOR at the time of this writing.

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Halliburton – An Undervalued Blue Chip Dividend Stock

Posted on July 6, 2012

By Robert Hauver

Looking for undervalued dividend stocks? Energy stocks have emerged as the Rodney Dangerfields of the market in 2012, being the only sector that’s still down, (-2.92%), after this new summer rally. However, the sector has pulled an impressive reversal, gaining over 8% since the June 4th lows. Halliburton, however, hasn’t joined in the fun yet, losing -1.52% since June 4th, and is now down almost 14% year-to-date, as of 7/6/12:

HAL-PERF

In addition to being in an out of favor sector, Halliburton’s 2012 earnings are flat, but, if you look to 2013, the picture gets brighter – HAL’s EPS is estimated to grow at over 10%. Couple this with its historically low range P/E of 8.72, and you have undervalued growth. We also ran a discounted model for future Earnings growth, with a risk-free rate of 13%, and came up with an intrinsic value of $61.00 for Halliburton.

HAL-PEG

Option trading strategies vs. dividends: Although HAL isn’t listed in our High Dividend Stocks By Sector Tables, it does have some high options yields.

The covered call trade listed below expires in October, and offers a call option premium of $1.68, over 18 times the dividend amount. Since the $30.00 strike is $.93 over HAL’s current strike price, there’s an additional potential assigned yield of over 11% annualized.

Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Schlumberger Just Sent A Buy Signal

Posted on June 29, 2012

By Robert Hauver

Buy Signal- Schlumberger dipped below the oversold 20 line on its Stochastic chart, but just crossed back above the line this week, which is seen by chartists as a buy signal:

SLB-CHART

Schlumberger, (SLB), is the world’s largest oilfield services provider, whose $83 billion market cap dwarfs those of its competitors, such as Halliburton and Baker Hughes. Like most Basic Materials/Energy-related stocks, SLB has been getting hammered this year, due to a number of factors – slowing Chinese and US growth, Eurozone problems, and declining oil prices. However, the oil price decline is a 2-edged sword, because some of that decline is due to the new shale oil discoveries that are being exploited via fracking in the US, which is Schlumberger’s biggest and most lucrative market:

Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

VF Corp, A Dividend Stock WIth A 20% Option Yield

Posted on June 22, 2012

By Robert Hauver

VF Corp., (VFC), has been one of the best stocks to buy this year for price gains, having outperformed the market thus far in 2012, and is only 9.06% off of its 52-week highs.VFC is among the top 20 Consumer Goods dividend stocks for 2012 performance.

VFC is a $9 billion apparel and footwear powerhouse, with a very diverse, international portfolio of brands and products, including such well known brands as Lee, Nautica, Wrangler, North Face, and Timberland.

VFC-BETA

With its 2.06% dividend yield, VFC isn’t really part of the high dividend stocks universe, but you can vastly improve upon its dividends by selling covered calls or cash secured puts.

Here’s a covered call trade for VFC, that’s listed in our Covered Call Table, along with over 30 other trades with high options yields. Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

BHP Billiton – An Undervalued Basic Materials Dividend Stock

Posted on June 8, 2012

By Robert Hauver

Looking for undervalued dividend paying stocks? Like many Basic Materials stocks, BHP Billiton PLC, (BBL), has been under under pressure in 2012, due to slowing growth and tightening financial policy in China. However, the Chinese government has begun loosening its policies, in order to keep growth moving near their targeted 7.5% GDP rate, which should help Basic Materials stocks such as BBL regain some of their luster.

Undervalued Growth: BBL, whose fiscal year ends 6/30/12, looks undervalued on a PEG basis for 2012 and 2013:

Click here to read more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.

Disney – An Undervalued Dividend Stock With Growth

Posted on May 25, 2012

By Robert Hauver

Looking for dividend paying stocks with growth at a reasonable price? The Walt Disney Co., (DIS), which is in the fast-growing Diversified Media industry, has bettered its peers in 2012 for share performance. However, Disney still looks undervalued, on a PEG basis, due to its growth prospects:

DIS-PEG

DIS-BETA

Disney is currently cashing in big-time on the huge hit, “The Avengers”, which has grossed $1.18 billion so far in global ticket sales, making it Disney’s biggest grossing movie of all time, even higher than any of its successful “Pirates Of The Caribbean” films – sorry pirates… One of Disney’s major ongoing strengths is its ESPN cable franchise, which is the highest paid cable network around, netting over 4 times what other cable channels get paid. Click here to learn more…

Disclaimer: This article is written for informational purposes only and isn’t intended as investment advice.