Introduction
Dividends add a tremendous amount of confidence when looking for value stocks. A dividend helps reaffirm that the company is indeed flowing cash positively. A value investor can then have greater confidence waiting for the undervaluation to correct. Dividend payments also re-compensates the investor for his patience.
Large cap dividend stocks seldom become undervalued - so finding some is a rare event.
Screen Details
This screen looks for large cap stocks above $5 Billion in market capitalization paying dividends. We require other filters to ensure attractive valuation and growing sales and earnings. Some of the other parameters include:
- Dividend Yield > 2%
- Dividend 5 Year Avg > 1%
- EPS 5 Year Avg Growth > 8%
- Payout Ratio < 60%
- Price/Book < 1.2
- Price/Sales < 2
- Sales 5 Year Avg Growth > 3%
The Screen Results
Stock | Company | Dividend Yield | P/B Ratio | P/E ratio | P/S Ratio |
|---|---|---|---|---|---|
CUK | Carnival | 4.8% | 1.2 | 9.5 | 1.4 |
KB | KB Financial Group | 4.5% | 0.5 | 5.7 | 0.7 |
PRU | Prudential Financial | 4.4% | 0.6 | 9.7 | 0.6 |
Notes and Observations
- CUK: Carnival is selling at lower range of its historical valuations as measured by P/E, P/B and P/S ratios. Slowing EPS growth has brought the shares down to undervalued levels. No doubt various cruise accidents/mishaps have not helped. It is worth looking at the stock further due to its valuation.
- KB: KB Financial is the largest bank in South Korea. There is a tremendous amount of country risk in the stock. It is cheap but the risk likely makes it not worth the trouble.
- PRU: The second largest insurance company in the US. The stock appears to be cheap based on the fundamental metrics. Will look deeper.
Ending Note
These stocks are very nice dividend paying stock with solid financials. They can all be a very good addition to any portfolio. We will continue researching the 2 out of 3 stocks from this screen.