14 Dividend Paying Stocks With Low P/E's And High Returns On Invested Capital

I built a screen that I would like to share that acts as a starting point in identifying quality stocks that have great historical returns on invested capital and relatively low current valuations.

Only companies that had a market cap over $1 billion and headquarters located in the U.S. were included.

I used EBIT as the earnings metric, so it is not a perfect after-tax return on invested capital. I calculated invested capital two ways, one with goodwill, and one without goodwill.

In addition, each of stocks has a low forwad P/E, a positive dividend yield and payout ratios below 52 percent. The return on assets is between 7.50% and  32.70%.

14 stocks fulfilled my critera.

These are the results...

14 Dividend Paying Stocks With Low P/E's
And High Returns On Invested Capital
(click to enlarge)

9 Best Undervalued Stocks To Buy And Hold For The Next 9 Years

The best holding period is forever, according to Warren Buffett, and we all should agree. 

Buying shares of high-quality businesses and holding them for years is the best way to compound your wealth. 

And if you can buy those shares at a discount to fair value, even better.

I evaluated 60 different companies this week to determine whether they are suitable for Defensive Investors. 

Out of those 60 companies, only 21 were found to be undervalued or fairly valued and suitable for either Defensive or Enterprising Investors.

Here are the 9 best results...

14 Stocks Where Inventory Grows Faster Than Sales

Income investors often use the Cash flow as key element of their stock valuation. The figure is calculated as net income plus several positions from the income statement.

- Start with net income. 
- Add back non-cash expenses. (Such as depreciation and amortization) 
- Adjust for gains and losses on sales on assets. 
- Add back losses Subtract out gains Account for changes in all non-cash current assets. 
- Account for changes in all current assets and liabilities except notes payable and dividends payable.

Source: http://www.investopedia.com

The problem is often the inventory. If sales run flat and inventory grows, there could be a massive risk for investors.

Goldman’s research shows that in a number of sectors inventory growth is outpacing sales growth and is also above normalized levels. Elevated inventory levels could help companies manipulate cash flow figures throughout 2016.

Here are a few stocks, discovered by Goldman Sachs where inventory sales could outpace sales growth...

9 Stocks For Value Investors With Dividend Focus

Value investing, perhaps more than any other type of investing, is more concerned with the fundamentals of a company's business rather than its stock price or market factors affecting its price. 

In the Cabot Benjamin Graham Value Investor, I utilize a value investing strategy developed by Benjamin Graham in the 1920s. 

The details of this value strategy are spelled out clearly in his book, "The Intelligent Investor," published 60 years ago. 

The objective of Graham's strategy is to identify unappreciated stocks and show you how to find undervalued stocks that meet certain criteria for quality and quantity ... stocks that are poised for stellar price appreciation.

Out of the multitude of companies, which ones would legendary value investor Benjamin Graham buy today? I've compiled nine great companies that fit Benjamin Graham's methods and criteria.

The companies in this list pass the rigorous requirements of either the Defensive Investor or the Enterprising Investor and are undervalued by the market.

These are the results:

40 Leaders And Laggards Of EPS Surprise / EPS Revision

A huge number of companies have released their Q4 fiscal figures. Market actors are looking deeply into those numbers in order to compare them with their expectations.

If a company does not meet them, it got punished.

Attached you will find the 10 best and worst stocks that beat expectations in Q4/2015. You will also find a list of the 10 best and worst stocks with the highest EPS revisions for the upcoming quarter.

Sometimes it indicates a clear trend.

Here are the top results...

These 20 Stocks Could Benefit From Higher Rates

The current problem on the market could be descried with the following sentence: Rising rates could let to a falling dollar. 

In contraction, Investors expect the US Dollar to rally, undermining equities and furthering headwinds to S&P 500 EPS and also amplified stress for EM borrowers (USD denom. debt). 

History says that the consensus is wrong and counters intuitively, when the Fed moves to neutral from easy (11 most recent cycles), USD weakened 55% of the time, with a median decline of 7% in the first year.

Below I've implemented screen results of stocks that might benefit from rising rate hikes. Stocks from the screen have fulfilled the following criteria:

Stock selection criteria...

(i) Stock’s price correlation to the USD (DXY Index) from 5/2014 – 3/2015 is less than -0.40

(ii) Mean implied upside based on analyst target prices is positive

(iii) P/E (‘15E and ‘16E) is below 25X but consensus EPS is positive

(iv) FCF yield is above 3%

(v) Company beat consensus EPS expectations the last 2 quarters.

Here are the 20 best yielding results in detail....

Stay Away From These 25 Stocks When The Fed Hikes Rates

Companies with variable/floating-rate debt are more immediately impacted (negatively) by a rate hike than companies with fixed rate debt.

It's easy to understand that a corporate with high debt and rising rates should lose earnings in the end. Attached you can find a list of companies that may lose values due to a soon rate hike.

I'm not a fan of highly leveraged companies. I know the hefty disadvantages from a debt burden but sometimes there could be some advantages appear. Just remember the tax benefits you should gain or return boosts due to a higher leverage.

Also interesting was the development from ABInbev. Those shares fall like a stone during the financial crisis in 2008/2009. After the freefall, when they found their bottom, they created massive values for investors with risk appetite.

It’s not always bad to invest into companies with a high leverage. You must consider each investment isolated.

Sometimes, when the underlying business is stable, you should find a real investment opportunity.

Attached is a small list of stocks that may offer a higher risk when the rates start to rise.

Here is the list...

5 Best Dividend Growth And Buyback Stocks Of The Week

One of my main thought related to investments is "how fast can the company pay my money back".

It's one of the basic principals in investing. Put your money into stocks that drive you cash back in a very short period of time. The smaller the pace, the bigger your return will be.

Warren Buffett bought BNSF Railway in November 3, 2009 for around USD 44 billion. It sounds like a huge amount of money but the railroad company who travelled 169 million miles in 2010 paid warren since his acquisition around $15 billion in dividends. Not bad for an old-school business.

Below I've compiled like each week stocks that have raised dividends during the past week. In addition, you can also find a list of those stocks which have released a share buyback program.

Receiving money, direct or indirect should help passive investors like me to hedge a minimum amount of return.

3 Fairly Priced High-Margin Stocks Warren Buffett Would Like

Everybody wants to make money, big money over the long-haul. You put money into a stock and get twice of this amount back in 10 years. That's great and I have often invested into stocks that doubled in a decade easily.

Today I like to come back to return. It's very important to see that the company makes good profits on its annual sales. The higher the margin, net or operational, the better is the market dominance of the firm.

I like companies with high margins, Google and Apple have unbelievable high margins. You might wonder but they have no direct competition and can charge customers each price they want, there is no alternative and if you need those products or you think you must have them, you must pay the bill.

You also may like: These 7 Dividend Cash Cows Produce Money Like Milk

Warren Buffett is also a great investor who invested into stocks that produce high returns on invested capital. It's the guarantee that the firm makes internal revenues which could be used to pay investors.

I ran a screen that searched for the accompanying criteria: 

- Average returns on invested capital > 12% over the last 5 years
- Current return on invested capital > its 5-year average 

I sifted further for organizations with a long history of solid sales and profit improvements combined with robust, and enhancing, net revenues that are not profoundly leveraged by debt. I added the accompanying extra criteria: 

- Average sales growth > 10% over the last 5 years

- Average EPS growth > 10% over the last 5 years

- Average operating profit margin > 10% over the last 5 years

- Current operating profit margin > its 5-year average

3 companies jumped on top of my screen. Very informative...

Best Consumer Stock Picks For 2013 | Growth Fairly Priced

Today I like to hunt for the best consumer growth stock picks of the next year 2013. The consumer sector is one of my favorite investment areas. 

Nearly half of my investments were made in consumer related product companies. I really love this sector due to the fact that there are so many well diversified companies with low risks. 

Stocks from the sector raise dividends like clockwork and sharing their business success with shareholders. 

In addition, I believe that the end-consumer spending will grow steadily because it’s a desire of humans to attain wealth and supply. People also want to represent something special. All ends in rising consumer demand. 

The consumer goods sector has nearly 400 companies listed and most of them are of low growth. Smart investors should take a closer look at the buy opportunities in order to find the best share to invest in.

Let's go! I made a screen of the best consumer growth picks. These are my criteria:

- Forward P/E under 15

- Past 5Y Sales growth over 10 percent

- Earnings per share growth for the next five years over 10 percent

- Operating Margin over 10 percent

Twelve stocks fulfilled these criteria of which six pay dividends and all twelve are currently recommended to buy. The results are dominated by textile, apparel, footwear and accessories stocks.

20 Best Stocks To Buy Or Sell On Black Friday

The best stocks to trade on Black Friday; originally published at “long-term-investments.blogspot.com”. Today is Black Friday. Yes, also for the financial markets is this calendar date a very meaningful event. It is the first day of the pre Christmas shopping season which indicates the strength of the full period. People searching for the best offers, the most attractive deals and spend as much money as their credit card allows. Some companies will benefit from Black Friday and the pre Christmas shopping season. Investors should be careful by buying Black Friday stocks.

I made a screen of well-known stocks which have an exposure to the current event. They are well diversified and should not have a higher downside risk if the sales numbers are weaker than expected. If you like the theme shopping and consumer goods and you like to buy stocks from several industries covering these ideas then you should take a look at the list of the 20 Black Friday stocks below.

The Black Friday shopping stock list consists of twenty stocks with consumer focus (apparel, jewelry, retail electronics and food). Most of them pay dividends and the average stocks is expected to grow in earnings by a double-digit amount. Below the results is one high-yield and sixteen have a current buy or better rating by brokerage firms.