Best Dividend Stocks Based on Valuation

by on November 10, 2011

in Screens

In today’s screen I pick out 5 dividend stocks with nice yields and low valuation based on earnings and/or book value. These companies maintain a payout ratio of less than 50% so the dividends are relatively safe. Additionally, I screen for stocks below $1.5 Billion in market value to give a good selection of smaller sized companies that have a potential to keep growing for years to come. Finally, these 5 stocks represent 5 different sectors to give a good diversification. These are some of the best dividend stocks I find in the small to mid cap segment of the stock market.

Homeowners Choice (HCII): This small Florida based property and casualty insurer provides insurance coverage to home owners, condominiums, and tenants. The $48 million market value company trades at a PE ratio of 8.27, and a Price to Book of 0.84. The company has no long term debt and $80 million in cash. The stock currently yields 5.1% in dividends.

Navios Maritime (NM): Navios Maritime is a bulk shipper based in Piraeus, Greece. It focuses on transshipment of coal, iron ore, fertilizers, grains and other commodities. It typically operates its ships under medium to long term charters. The company has a market value of $371 million and yields a 6.3% dividend. The stock can be bought at a 5.2 P/E and at 0.35 times the book value. However, with the current down cycle in shipping and a glut of ships on the ocean, the book value likely overstates the market value of its assets by a fair margin. As is the case with most shippers, the company has a fair amount of debt (1.54 Billion) but the company has been cash flow positive in the last two years.

Aircastle Limited (AYR): Aircastle acquires, leases and sells high utility commercial jet aircrafts to passenger and cargo airlines worldwide. The $892 million company yields 5% and trades at 9.87 times earnings and 0.64 times its book value. The company posted a 91% earnings increase in Q3 with the comparable quarter last year and increased its dividend by 20%. It has also bought back 9.5% of its outstanding shares so far in 2011.

American Greetings (AM): A $627 million market cap greeting cards company, American Greetings offers a 3.8% dividend yield and its stock sells for approximately 7 times its trailing earnings. The company has delivered a 13% ROE and has a healthy balance sheet with manageable debt. The stock is also priced at 0.78 times book value giving it an attractive valuation.

Ennis Inc. (EBF): Formerly known as Ennis Business Forms, the company produces and sells business forms, office supplies and apparel. The Texas based company currently yields a healthy 4% dividend. The stock currently trades at 9.3 PE and 1 times book value, giving it an attractive valuation.

Any of these 5 dividend stocks can make a great acquisition for yield hunters who are also interested in capital growth. Use these ideas as a basis of your research and let me know what you think.

Disclaimer: I do not own any of these stocks nor plan to buy or sell them in the next 72 hours
This post is included in the Self Directed Investing for Retirement Carnival

Leave a Comment

John Huner December 25, 2011 at 7:14 pm

HCII is very interesting, I have added it to my watch list.

Reply

Shailesh Kumar December 25, 2011 at 7:18 pm

Agreed. Sometimes you can find interesting gems in the small caps.

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