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My 4 Favorites from the Services Sector with Big Dividends and Strongest Earnings Growth
Posted by: Dividend (IP Logged)
Date: February 8, 2013 09:48AM

The services sector is still an attractive investment field. I also have invested some money into stocks from the sector, such as Wal-Mart and Walt Disney.

The whole sector has 844 companies listed of which 350 pay dividends. The total market capitalization of all services stocks combined is USD58.896 trillion. An average stock from the sector has a P/E ratio of 24.94 and yields at 1.66 percent.

I don’t like services stocks because of the low-margin business. I love stocks with big margins and strong competitive advantages. High margins also show that the company owns and distributes products that are unique. Apple has really huge margins because it has created a unique product that people love and they are willing to pay nearly any price for it.

It sounds a little bit easy but the Apple story is much more complicated and is also a product of excellent brand marketing. But I will never buy Apple shares because of the fast product cycle. If you lose your consumer focus, you are off the battle.

However, out there are some services stocks with a strong consumer loyalty and huge growth potential which is still attractive for many investors. Think about the payment providers MasterCard and Visa.

Today I want to highlight some of the best yielding services dividend stocks with a double-digit growth, expected for the next five years.

There are nearly 200 companies — wow, the services sector is full of growth. So, I focus on large capitalized stocks with the highest yield. Below is a small list of the 20 best results. Railroads are my favorites due to the expected shale gas boom and the cheap valuation.

Here are my favorite stocks:
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Norfolk Southern (NSC) has a market capitalization of $21.60 billion. The company employs 30,329 people, generates revenue of $11.040 billion and has a net income of $1.749 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $4.040 billion. The EBITDA margin is 36.59 percent (the operating margin is 28.30 percent and the net profit margin 15.84 percent).

Financial Analysis: The total debt represents 28.61 percent of the company’s assets and the total debt in relation to the equity amounts to 88.95 percent. Due to the financial situation, a return on equity of 17.69 percent was realized. Twelve trailing months earnings per share reached a value of $5.36. Last fiscal year, the company paid $1.94 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 12.84, the P/S ratio is 1.98 and the P/B ratio is finally 2.22. The dividend yield amounts to 2.89 percent and the beta ratio has a value of 1.13.

Target Corporation (TGT) has a market capitalization of $40.54 billion. The company employs 365,000 people, generates revenue of $69.865 billion and has a net income of $2.929 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $7.453 billion. The EBITDA margin is 10.67 percent (the operating margin is 6.38 percent and the net profit margin 4.19 percent).

Financial Analysis: The total debt represents 38.73 percent of the company’s assets and the total debt in relation to the equity amounts to 114.14 percent. Due to the financial situation, a return on equity of 18.71 percent was realized. Twelve trailing months earnings per share reached a value of $4.51. Last fiscal year, the company paid $1.15 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 13.80, the P/S ratio is 0.58 and the P/B ratio is finally 2.65. The dividend yield amounts to 2.30 percent and the beta ratio has a value of 0.93.

Fidelity National Information (FIS) has a market capitalization of $10.87 billion. The company employs 33,000 people, generates revenue of $5.745 billion and has a net income of $505.30 million. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.704 billion. The EBITDA margin is 29.66 percent (the operating margin is 18.57 percent and the net profit margin 8.79 percent).

Financial Analysis: The total debt represents 34.73 percent of the company’s assets and the total debt in relation to the equity amounts to 73.96 percent. Due to the financial situation, a return on equity of 7.65 percent was realized. Twelve trailing months earnings per share reached a value of $1.74. Last fiscal year, the company paid $0.20 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 21.35, the P/S ratio is 1.91 and the P/B ratio is finally 1.68. The dividend yield amounts to 2.14 percent and the beta ratio has a value of 0.67.

Yum! Brands (YUM) has a market capitalization of $28.67 billion. The company employs 60,580 people, generates revenue of $13.633 billion and has a net income of $1.608 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2.939 billion. The EBITDA margin is 21.56 percent (the operating margin is 16.83 percent and the net profit margin 11.79 percent).

Financial Analysis: The total debt represents 32.65 percent of the company’s assets and the total debt in relation to the equity amounts to 136.58 percent. Due to the financial situation, a return on equity of 80.31 percent was realized. Twelve trailing months earnings per share reached a value of $3.37. Last fiscal year, the company paid $1.24 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.86, the P/S ratio is 2.09 and the P/B ratio is finally 13.18. The dividend yield amounts to 2.13 percent and the beta ratio has a value of 0.83.

Take a closer look at the full list of the 20 services dividend stocks with best growth perspectives. The average P/E ratio amounts to 17.11 and forward P/E ratio is 13.29. The dividend yield has a value of 2.30 percent. Price to book ratio is 3.86 and price to sales ratio 1.54. The operating margin amounts to 14.76 percent and the beta ratio is 1.20. Stocks from the list have an average debt to equity ratio of 0.98.

Related stock ticker symbols:
NSC, UPS, WAG, CSX, CCL, TWC, CAH, CUK, MHP, TGT, LTD, FIS, YUM, UNP, HOT, M, TWX, TYC, JWN, VIAB

Selected Articles:
· Best Services Stock Picks For 2013 | A Selection Of Growth Stocks
· 13 Best Dividend Paying Services Stocks
· The Best Yielding Large Cap Services Stocks
· Best Dividend Paying Stocks As Of February 2013

The best growing services dividend stocks originally published at long-term-investments.blogspot.com.


Stocks Discussed: NSC, UPS, WAG, CSX, CCL, TWC, CAH, CUK, MHP, TGT, LTD, FIS, YU,
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