There are a number of great companies in the market today. The ModernGraham Valuation Model has selected 10 of the best dividend paying stocks for the Enterprising dividend stock investor. These companies have the highest dividend yields among the undervalued companies and are suitable for Enterprising Investors according to the ModernGraham approach.
Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.
The companies selected for this list may not pay what some consider to be a huge dividend, but they have demonstrated strong financial positions through passing the requirements of the Enterprising Investor and show potential for capital growth based on their current price in relation to intrinsic value. As such, these defensive dividend stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.
Starwood Property Trust Inc. (STWD, Financial)
Starwood Property Trust Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.17 in 2012 to an estimated $1.98 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.4% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Starwood Property Trust Inc. revealed the company was trading below its Graham Number of $27.64. The company pays a dividend of $1.92 per share for a yield of 8.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share) was 11.3, below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)
Sabra Health Care REIT Inc. (SBRA, Financial)
Sabra Health Care REIT Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from 29 cents in 2012 to an estimated 88 cents for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 9.6% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Sabra Health Care REIT Inc. revealed the company was trading above its Graham Number of $17.74. The company pays a dividend of $1.66 per share for a yield of 6.8%, putting it among the best dividend paying stocks today. Its PEmg was 27.71, below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-15.03. (See the full valuation)
Seagate Technology PLC (STX, Financial)
Seagate Technology PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last 10 years and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from $2.39 in 2012 to an estimated $3.74 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.03% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price. (See the full valuation)
Kimco Realty Corp. (KIM, Financial)
Kimco Realty Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from 29 cents in 2012 to an estimated $1.24 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 7.79% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Kimco Realty Corp. revealed the company was trading above its Graham Number of $19.53. The company pays a dividend of $1.01 per share for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg was 24.09, below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-13.21. (See the full valuation)
Navient Corp. (NAVI, Financial)
Navient Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from 63 cents in 2012 to an estimated $2.39 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.25% annual earnings loss over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Navient Corp. revealed the company was trading below its Graham Number of $21.98. The company pays a dividend of 64 cents per share for a yield of 4.5%, putting it among the best dividend paying stocks today. Its PEmg was 6.01, below the industry average of 19.87, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)
Western Refining Inc. (WNR, Financial)
Western Refining Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last 10 years and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from $1.03 in 2012 to an estimated $3.13 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.97% annual earnings loss over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price. (See the full valuation)
LyondellBasell Industries NV (LYB, Financial)
LyondellBasell Industries NV is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last 10 years, the poor dividend history and the high price-book ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from $-944.17 in 2012 to an estimated $8.48 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.4% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price. (See the full valuation)
Valero Energy Corp. (VLO, Financial)
Valero Energy Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio and insufficient earnings stability over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg  from $1.71 in 2012 to an estimated $5.39 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.84% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Valero Energy Corp. revealed the company was trading above its Graham Number of $54.08. The company pays a dividend of $2.1 per share for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg was 10.18, below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-18.5. (See the full valuation)
MetLife Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last 10 years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from $2.37 in 2012 to an estimated $4.04 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.75% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into MetLife Inc. revealed the company was trading below its Graham Number of $78.35. The company pays a dividend of $1.55 per share for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg was 14.01, below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry. (See the full valuation)
Marathon Petroleum Corp. (MPC, Financial)
Marathon Petroleum Corp. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last 10 years and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg from $2.71 in 2012 to an estimated $3.67 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.51% annual earnings growth over the next seven to 10 years. As a result, the valuation model returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Marathon Petroleum Corp. revealed the company was trading above its Graham Number of $32.64. The company pays a dividend of $1.28 per share for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg was 11.52, below the industry average of 55.24, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its net current asset value (NCAV) of $-38.3. (See the full valuation)
What do you think? Are these companies a good value for Enterprising Investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss. Be sure to check out all of the companies reviewed by ModernGraham!
Disclosure:Â The author held a long position in Starwood Property Trust (STWD, Financial) and Western Refining Inc. (WNR, Financial) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.
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