An Oversold, Undervalued Blue Chip Dividend Stock With High Options Yields

by Robert Hauver

This article will focus on the “Rodney Dangerfield” of drilling dividend stocks, UK-based Ensco plc, (ticker ESV), which has had big dividend and earnings growth, and looks poised to continue that trend. Unfortunately for its shareholders, the market has given ESV little respect over the past year, sending it down to an oversold price/share currently:
ESV1-CHART
ESV1-PERF

Undervalued Earnings: ESV has concentrated on modernizing its fleet, and has one of the youngest fleets in the drilling industry, with 9 new rigs delivered over the past 3 years, and 8 more to be delivered through 2015. This has helped it achieve higher margins than its competitors, and has also contributed to strong growth over the trailing 4 quarters:
EVS1-QTRLY

Analysts are estimating continued EPS growth in 2014, which, combined with ESV’s low P/E, show it to be undervalued on a PEG basis:
ESV1-PEG
Looking further into the future, ESV also has a low 5-year forward PEG ratio of .60:
ESV1-EPS5YR
More Valuations: ESV also looks undervalued vs. its industry on a Price/Sales and a Price/Book basis:
ESV1-PB
Strong Dividend Growth: ESV has raised its quarterly dividend all the way from $.025 in 2008, to $.50 in 2013.
ESV1-DIV
Options: Although ESV isn’t in the universe of high dividend stocks, it does have high options yields. You can substantially increase your yield on ESV’s dividends, via selling Covered Calls.
This March 2014 trade, from our Covered Calls Table, has a $55.00 strike price. The call premium pays 3 times what ESV’s next 2 dividends pay. You’ll also get paid this covered call premium now, vs. having to wait for ESV’s next 2 dividends to be paid out:
ESV1-CALL
We’ve listed the 3 major scenarios below for this call options trade:
ESV1-CALLINC
Puts: If you want to achieve a lower breakeven cost now, selling Cash Secured Puts is the way to go. This put options trade also expires in March 2014, and pays en even higher options premium, of $3.90, while giving you a breakeven of $51.10, which is just above ESV’s 52-week low. You can see more details for this and over 30 other Put options trades, in our Cash Secured Puts Table:
ESV1-PUT
Financials: As we mentioned above, ESV enjoys much higher margins than its industry averages. It carries a bit more debt, but it does have an Interest Coverage ratio of 11.52.
ESV1-ROE
Author: Robert Hauver, copyright 2013 DeMar Marketing, All Rights Reserved.
Disclosure: Author had no ESV stock or options positions yet at the time of this writing, but may initiate positions over the next 72 hours.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

3 Basic Materials Dividend Stocks Trouncing The Market

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…

6 Foreign Dividend Stocks With Low PEG’s, Low Debt, & High Put Yields

By Robert Hauver

In the ongoing search for strong dividend paying stocks, it’s becoming increasingly clear that foreign dividend stocks need to be considered.  With that in mind, this week we screened for foreign dividend stocks that trade in the US as ADR’s, with upcoming 2010 dividend payouts, debt/equity below 1, and low next-year PEG ratios.

(Note: the ex-dividend dates and payouts listed below are approximate dates and amounts, based on recent history, as some of  these dividends haven’t been declared yet.  Verify dates and payouts with your broker before investing.)

Here are brief profiles these 6 foreign stocks:

Banco Santander (STD): A financial group operating principally in Spain, the United Kingdom, Portugal, other European countries, Brazil and other Latin American countries and the United States, offering a range of financial products. It operates in 4 segments: Continental Europe, United Kingdom, Latin America and Sovereign. STD pays approx. $.16/share quarterly – its next ex-dividend date should be around Oct. 13th.

(STD is currently listed in our High Dividend Stocks by Sector Tables, in the Financials section.)

Eni SpA (E): Italy-based Eni is in the oil and gas, power generation, petrochemicals, oilfield services and engineering industries. Eni has operations in 77 countries as of December 31, 2009. It operates in five segments: Exploration & Production, Gas & Power, Refining & Marketing, Petrochemicals and Other segments.  Eni pays semi-annually.  It’s next ADR ex-dividend date is Sept. 17th, with a payout equivalent to 1 Euro/share.

Ensco plc (ESV): UK-based Ensco is an offshore contract drilling company. As of February 15, 2010, Ensco’s offshore rig fleet included 42 jackup rigs, four ultra-deepwater semisubmersible rigs and one barge rig. Additionally, it had four ultra-deepwater semisubmersible rigs under construction. Ensco’s operations are concentrated in the regions of Asia Pacific, which includes Asia, the Middle East and Australia, Europe and Africa, and North and South America. It operates under four segments: Deepwater, Asia Pacific, Europe and Africa, and North and South America. Ensco pays $.35/share quarterly. Its next ex-dividend date should be approx. Dec. 1st.

Toronto Dominion Bank (TD): A Canadian bank serving approximately 17 million customers in four segments: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Insurance; Wealth Management, including TD Waterhouse and an investment in TD AMERITRADE Holding Corporation (TD Ameritrade); U.S. Personal and Commercial Banking, including TD Bank, America’s Most Convenient Bank, and Wholesale Banking, including TD Securities. The Bank also acts as online financial services firm, with more than 5.5 million online customers. On June 11, 2009, TD Waterhouse Canada Inc., a subsidiary of the Bank, acquired thinkorswim Canada, Inc., an online options trading brokerage.  TD pays approx. $.58/share quarterly. Its next ex-dividend date should be around Oct. 1st.

Total SA (TOT): France’s Total is the fifth largest publicly-traded integrated international oil and gas company in the world. An integrated international oil and gas company, with operations in more than 130 countries, TOTAL engages in all aspects of the petroleum industry, including Upstream operations (oil and gas exploration, development and production, liquefied natural gas (LNG)) and Downstream operations (refining, marketing and the trading and shipping of crude oil and petroleum products). It also produces base chemicals (petrochemicals and fertilizers) and specialty chemicals for the industrial and consumer markets. In addition, TOTAL has interests in the coal mining and power generation sectors, as well as a financial interest in Sanofi-Aventis. It is also active in solar-photovoltaic power, both in Upstream and Downstream activities. TOTAL’s worldwide operations are conducted through four business segments: Upstream, Downstream, Corporate and Chemicals.  Total pays semi-annually. Its next ex-dividend date should be around Nov. 9th, with an approx. $1.61 payout, based on 2009’s Nov. payout. But this hasn’t been declared yet.

Willis Group Holdings (WSH): A UK-based global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 Associates serving clients in virtually every part of the world.  WSH pays $.26/share quarterly. Its next ex-dividend date should be around Sept. 28th.

Here are selected Financial metrics for these firms:

6ForStksROE

Here are Valuation metrics:

6ForStks-Val'n

As you can see from the table above, the good next-year growth prospects for these stocks are translating into low next year PEG ratios.  The next-year PEG ratios, however, are much more attractive, at present, than the 5-year PEG valuations, and appear to support taking a shorter-term view of some of these equities.

One conservatively bullish strategy that would also give you more downside protection and even higher yields, would be to sell cash secured puts on these stocks. As the following table illustrates, there are high yielding cash secured puts for these foreign dividend stocks. Excepting WSH, all of these trades expire in Jan-Feb. 2011, approx. 5-6 months:

6ForStks-Puts

We’ve added these dividend stocks to our Cash Secured Puts Table this week. There are more details there about each of these put option trades.

Disclosure: No positions at this time.

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

5 Undervalued Basic Materials/Energy Dividend Stocks

By Robert Hauver

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.