Five Value Stocks With High Dividend Yields
As markets recover from the Hurricane Sandy shutdown, stocks are pricing in the data of the last few days. With bond yields remaining at or near record low levels, investors could take advantage of any potential volatility in stocks over the next few days to add yield to their portfolios by investing in value stocks with high dividends.
Value stocks are defined as stocks that have low valuations on certain metrics, including price-to-earnings ratios and price-to-book ratios. The stocks below were all found because they have low price-to-tangible book ratios, an advanced form of the price-to-book ratio. Also, this screen ignored financial companies, as they have all had low price-to-book values since the Great Recession due to global macro fears. In addition, they must also have had strong dividend yields.
Stock #1: CenturyLink Inc. (NYSE: CTL)
CenturyLink is a telecommunications company providing a range of services including network access and broadband services. Currently, CenturyLink has a price-to-tangible book value of 1.1 and a dividend yield of 7.5 percent. By investing in CenturyLink, an investor can lock in a yield that is some 580 basis points higher than the 10-year treasury bond. The yield on the dividend has also been rather stable since 2008, fluctuating between 6 and 8 percent for much of that period.
Stock #2: Duke Energy Corp. (NYSE: DUK)
Duke Energy is a regulated utility operating in the southern and midwest U.S. Overall, utilities offer attractive dividend yields, especially when compared to government bond yields. Duke yields 4.7 percent currently, 300 basis points above the 10-year Treasury bond, and has a price-to-tangible book value of 1.3, meaning that it too is relatively undervalued. Dividends have been relatively stable since 2008, fluctuating between 4 and 6 percent.
Stock #3: American Electric Power Co. (NYSE: AEP)
American Electric Power Co. is another utility that appears attractive based on current market valuations. Once again, utilities tend to offer strong yields and stable cash flows and AEP is no exception. Currently, AEP yields 4.3 percent, 260 basis points above the 10-year government bond yield. Also, dividends have been relatively stable since the beginning of 2010, staying between 4 and 5 percent.
ConocoPhillips (NYSE: COP)
ConocoPhillips is a diversified energy company with operations in exploration and production, midstream operations, and refining. The stock currently yields 4.6 percent, 290 basis points above the 10-year Treasury yield, and has a price-to-tangible book value of 1.4. Also, the company has grown its dividend yield from 3.33 percent in 2008 to 4.617 percent Wednesday.
DTE Energy Corp.
DTE is a power utility with operations in the Midwest United States. As a customer, I can attest to the consistency and quality of service the company provides. Currently, the company has a dividend yield of 4.0 percent, 230 basis points above the 10-year Treasury bond, and a price-to-tangible book value of 1.3. Thus, the company too looks attractive on these metrics. Also, the company has kept dividends relatively stable since 2001 on a dollar basis and the yield has stayed rather consistent also, indicating that it has a relatively stable stock price, as shown by its low beta of 0.71.
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