There are a number of great companies in the market today. I've selected the highest dividend yields among the undervalued or fairly valued companies for defensive dividend stock investors reviewed by ModernGraham. Each company has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.
Please note that I've added fairly valued companies to this screen as the market's current valuation did not allow for the usual screen of only undervalued companies.
Defensive Investors are defined as investors who 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 rigorous requirements of the Defensive 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.
AT&T Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $3.17 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.36% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into AT&T Inc. revealed the company was trading below its Graham Number of $41.02. The company pays a dividend of $1.97 per share, for a yield of 5.5%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 11.23, which was below the industry average of 41.47, 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 $-36.26.Â
Verizon Communications Inc. (VZ, Financial)
Verizon Communications Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.11 in 2014 to an estimated $4.58 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.11% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Verizon Communications Inc. revealed the company was trading above its Graham Number of $29.66. The company pays a dividend of $2.34 per share, for a yield of 4.8%, putting it among the best dividend-paying stocks today. Its PEmg was 10.71, which was below the industry average of 37.96, 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 $-45.Â
Invesco Ltd. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2014 to an estimated $2.63 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.87% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Invesco Ltd. revealed the company was trading below its Graham Number of $38.6. The company pays a dividend of $1.15 per share, for a yield of 3.6%, putting it among the best dividend-paying stocks today. Its PEmg (price over earnings per share - ModernGraham) was 12.24, which was below the industry average of 21.55, 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 $-14.2.Â
People's United Financial Inc. (PBCT, Financial)
People's United Financial Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from 71 cents in 2014 to an estimated $1.02 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 5.13% 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 within a margin of safety relative to the price.
At the time of valuation, further research into People's United Financial Inc. revealed the company was trading below its Graham Number of $21.22. The company pays a dividend of 69 cents per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg was 18.76, which was below the industry average of 20.84, which by some methods of valuation makes it one of the most undervalued stocks in its industry.Â
WEC Energy Group Inc. (WEC)
WEC Energy Group Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.43 in 2014 to an estimated $3.17 for 2018. This level of demonstrated earnings growth does not support the market's implied estimate of 5.59% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price. (Note: Since the latest valuation was completed, the company's price has dropped just low enough for it to qualify as Fairly Valued.)
At the time of valuation, further research into WEC Energy Group Inc. revealed the company was trading above its Graham Number of $46.9. The company pays a dividend of $2.08 per share, for a yield of 3.3%, putting it among the best dividend-paying stocks today. Its PEmg was 19.68, which was below the industry average of 24.93, 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 $-62.96.
DTE Energy Co. (DTE, Financial)
DTE Energy Co. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $4.22 in 2014 to an estimated $5.44 for 2018. This level of demonstrated earnings growth supports the market's implied estimate of 5.04% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into DTE Energy Co. revealed the company was trading above its Graham Number of $82.68. The company pays a dividend of $3.36 per share, for a yield of 3.3%, putting it among the best dividend-paying stocks today. Its PEmg was 18.58, which was below the industry average of 24.93, 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 $-118.29.Â
Cardinal Health Inc. (CAH, Financial)
Cardinal Health Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.48 in 2014 to an estimated $4.43 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.14% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Cardinal Health Inc revealed the company was trading above its Graham Number of $50.88. The company pays a dividend of $1.81 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg was 14.78, which was below the industry average of 43.8, 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 $-32.02.
Newell Brands Inc. (NWL, Financial)
Newell Brands Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.28 in 2014 to an estimated $2.89 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.48% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Newell Brands Inc revealed the company was trading below its Graham Number of $41.25. The company pays a dividend of 88 cents per share, for a yield of 3.2%, putting it among the best dividend-paying stocks today. Its PEmg was 9.46, which was below the industry average of 20.37, 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 $-26.44.Â
Principal Financial Group Inc. (PFG, Financial)
Principal Financial Group Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.90 in 2014 to an estimated $5.62 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.21% 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 Principal Financial Group Inc. revealed the company was trading below its Graham Number of $74.18. The company pays a dividend of $1.87 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg was 10.92, which was below the industry average of 20.16. By some methods of valuation, that makes it one of the most undervalued stocks in its industry.Â
CVS Health Corp. (CVS, Financial)
CVS Health Corp. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company's strong financial position. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.43 in 2014 to an estimated $5.67 for 2018. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.57% annual earnings growth over the next seven to 10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into CVS Health Corp revealed the company was trading below its Graham Number of $72.47. The company pays a dividend of $2 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg was 11.64, which was below the industry average of 37.1, 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 $-24.2.Â
What do you think? Are these companies a good value for Defensive Investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.
Disclaimer:
The author held a long position in Invesco Ltd. (IVZ, Financial) and People's United Financial Inc (PBCT, 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. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner.Â
