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Philip van Doorn

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Aug. 26, 2019, 1:45 p.m. EDT

25 dividend stocks selected for value by an outperforming money manager

John Buckingham of The Prudent Speculator provides a special screen of dividend stocks for MarketWatch readers

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By Philip van Doorn, MarketWatch


Bloomberg
Royal Dutch Shell is one of the highest-yielding stocks on a list selected by John Buckingham, editor of The Prudent Speculator.

(This is the first in a series about dividend stocks in today’s low interest-rate environment based on interviews with professional investors. Links to the other articles are below.)

Dividend-stock strategies have long been popular because of the correlation between steady increases of payouts and investment growth. But the low-and-declining interest-rate environment is setting the stage for attractive returns, especially for dividend stocks with value characteristics, according to John Buckingham, the editor of The Prudent Speculator.

Buckingham did a special screen of stocks held within Prudent Speculator portfolios to narrow the group to 25 that meet additional criteria, as listed below. He also provided three- to five-year price targets for the group. That is in contrast to the 12-month targets and ratings used by most Wall Street analysts.

The Prudent Speculator is published by AFAM Capital, a division of Kovitz Investment Group of Chicago. AFAM Capital merged with Kovitz in October. AFAM manages about $700 million, mostly for private clients, while Kovitz’s total assets under management exceed $5 billion.

The Prudent Speculator has the top 30-year performance ranking among newsletters tracked by the Hulbert Financial Digest , with an average annualized return of 13.15% through July 30, compared with an average return of 9.66% for the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +0.0020%  (including reinvested dividends), according to FactSet.

In an interview on Aug. 21, Buckingham said investors may have overreacted to the barrage of alarming reports saying the temporary inversion of the two-year and 10-year Treasury yield curve last week. Those comments are below.

Dividend stock screen

Here’s the list of 25 dividend stocks, in alphabetical order, screened from the 120 stocks held within Prudent Speculator portfolios:

Company Ticker Dividend yield - current Total return - 12 months Closing price - Aug. 18 Price target—three to five years P/E - trailing P/E - forward
Archer-Daniels-Midland Co. /zigman2/quotes/203479136/composite ADM 3.74% -24% $37.48 $53.71 12.3 11.3
Albemarle Corp. /zigman2/quotes/200578017/composite ALB 2.29% -32% $64.17 $122.66 11.0 9.8
BB&T Corp. /zigman2/quotes/200481602/composite BBT 3.91% -9% $46.05 $69.02 11.4 11.7
Bristol-Myers Squibb Co. /zigman2/quotes/202559280/composite BMY 3.44% -18% $47.63 $67.02 11.5 10.9
Cardinal Health Inc. /zigman2/quotes/206646342/composite CAH 4.40% -12% $43.76 $73.04 8.3 8.8
Caterpillar Inc. /zigman2/quotes/203434128/composite CAT 3.53% -14% $116.67 $179.55 10.1 10.1
Celanese Corp. /zigman2/quotes/205151277/composite CE 2.22% -1% $111.74 $153.60 10.8 10.4
Comerica Inc. /zigman2/quotes/207245846/composite CMA 4.40% -37% $60.89 $105.14 8.0 8.0
CVS Health Corp. /zigman2/quotes/209664499/composite CVS 3.25% -15% $61.56 $104.99 8.8 8.9
Fifth Third Bancorp /zigman2/quotes/207561596/composite FITB 3.78% -12% $25.41 $40.92 8.3 8.9
Foot Locker Inc. /zigman2/quotes/204092533/composite FL 3.88% -22% $39.21 $74.61 8.2 7.8
Gilead Sciences Inc. /zigman2/quotes/210293917/composite GILD 3.97% -9% $63.44 $100.69 9.3 9.3
Goldman Sachs Group Inc. /zigman2/quotes/209237603/composite GS 2.50% -14% $199.98 $289.10 8.5 8.4
International Business Machines Corp. /zigman2/quotes/203856914/composite IBM 4.87% -5% $133.00 $183.10 10.2 10.7
Kroger Co. /zigman2/quotes/206215053/composite KR 2.79% -25% $22.91 $33.72 10.8 10.6
Kohl's Corp. /zigman2/quotes/210414114/composite KSS 5.97% -41% $44.88 $72.84 8.8 9.0
ManpowerGroup Inc. /zigman2/quotes/200637338/composite MAN 2.59% -3% $84.23 $135.72 10.5 11.0
NetApp Inc. /zigman2/quotes/209297588/composite NTAP 4.17% -43% $46.09 $76.63 10.8 11.0
PNC Financial Services Group Inc. /zigman2/quotes/203416310/composite PNC 3.65% -10% $126.20 $168.63 11.4 10.9
Prudential Financial Inc. /zigman2/quotes/203750923/composite PRU 4.96% -14% $80.65 $133.83 6.8 6.5
Royal Caribbean Cruises Ltd. /zigman2/quotes/208854639/composite RCL 2.60% -6% $107.63 $158.09 11.5 10.9
Royal Dutch Shell PLC ADR Class A /zigman2/quotes/205095589/composite RDS.A 5.74% -8% $55.66 $94.19 11.4 11.2
Seagate Technology PLC /zigman2/quotes/201824240/composite STX 5.43% -10% $46.37 $59.67 9.9 10.8
Tapestry Inc. /zigman2/quotes/207417762/composite TPR 6.42% -58% $21.04 $41.74 8.5 8.5
Walgreens Boots Alliance Inc. /zigman2/quotes/203410933/composite WBA 3.61% -25% $50.67 $99.04 8.5 8.6
Sources: Kovitz Investment Group, FactSet

The Prudent Speculator holds 120 stocks, selected using AFAM Capital’s proprietary value methodology from a universe of about 2,700 stocks, including the 2,500 in the Russell 3000 /zigman2/quotes/210598149/delayed RUA -0.03%  that have sufficient liquidity to hold trading costs down, and another 200 American depositary receipts (ADRs) of non-U.S. companies.

Buckingham screened the stocks among those in Prudent Speculator portfolios that have dividend yields above the yields on 30-year U.S. Treasury bonds /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -1.59%  using these criteria:

• Minimum dividend yield of 2.2%.

• Forward price-to-earnings ratio less than two-thirds of the current ratio of 17.7 for the S&P 500.

• Negative total return over the past 12 months.

• Pass additional proprietary “quality” screening to ensure all of the following:

  • Inexpensive backward-looking valuation metrics relative to peers.

  • Solid credit rating or lower debt-to-equity level.

  • Non-negative long-term growth outlook.

  • Earnings over next year showing growth or only a very modest decline.

• Significant long-term total return potential as calculated using a proprietary forward-looking valuation model.

Looking at the dividend-stock list, there are four with dividend yields higher than 5%, with nine higher than 4% and 17 higher than 3.5%. The price-to-earnings ratios are low. In comparison, the S&P 500’s trailing P/E is 18.5, and the forward P/E is 16.5, based on weighted aggregate consensus earnings estimates for the next 12 months among analysts polled by FactSet.

/zigman2/quotes/210599714/realtime
US : S&P US
3,006.79
+0.06 +0.0020%
Volume: 1.55B
Sept. 19, 2019 5:17p
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/zigman2/quotes/203479136/composite
US : U.S.: NYSE
$ 40.90
-0.77 -1.85%
Volume: 2.48M
Sept. 19, 2019 6:30p
P/E Ratio
17.58
Dividend Yield
3.42%
Market Cap
$22.78 billion
Rev. per Employee
$2.03M
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/zigman2/quotes/200578017/composite
US : U.S.: NYSE
$ 68.29
+0.89 +1.32%
Volume: 1.24M
Sept. 19, 2019 6:30p
P/E Ratio
13.34
Dividend Yield
2.15%
Market Cap
$7.24 billion
Rev. per Employee
$572,025
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/zigman2/quotes/200481602/composite
US : U.S.: NYSE
$ 52.79
-0.32 -0.60%
Volume: 3.19M
Sept. 19, 2019 6:30p
P/E Ratio
13.08
Dividend Yield
3.41%
Market Cap
$40.45 billion
Rev. per Employee
$362,741
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/zigman2/quotes/202559280/composite
US : U.S.: NYSE
$ 50.07
+0.21 +0.42%
Volume: 8.08M
Sept. 19, 2019 6:30p
P/E Ratio
13.15
Dividend Yield
3.28%
Market Cap
$81.90 billion
Rev. per Employee
$968,283
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/zigman2/quotes/206646342/composite
US : U.S.: NYSE
$ 48.02
+0.14 +0.29%
Volume: 2.01M
Sept. 19, 2019 6:30p
P/E Ratio
10.65
Dividend Yield
4.01%
Market Cap
$14.32 billion
Rev. per Employee
$2.83M
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/zigman2/quotes/203434128/composite
US : U.S.: NYSE
$ 130.12
-0.95 -0.72%
Volume: 2.74M
Sept. 19, 2019 6:30p
P/E Ratio
12.12
Dividend Yield
3.17%
Market Cap
$73.20 billion
Rev. per Employee
$526,173
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/zigman2/quotes/205151277/composite
US : U.S.: NYSE
$ 123.80
+0.06 +0.05%
Volume: 685,699
Sept. 19, 2019 6:30p
P/E Ratio
15.48
Dividend Yield
2.00%
Market Cap
$15.32 billion
Rev. per Employee
$931,156
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/zigman2/quotes/207245846/composite
US : U.S.: NYSE
$ 66.00
-0.92 -1.37%
Volume: 1.55M
Sept. 19, 2019 6:30p
P/E Ratio
8.47
Dividend Yield
4.06%
Market Cap
$9.86 billion
Rev. per Employee
$444,417
loading...
/zigman2/quotes/209664499/composite
US : U.S.: NYSE
$ 63.63
+0.37 +0.58%
Volume: 4.61M
Sept. 19, 2019 6:30p
P/E Ratio
17.82
Dividend Yield
3.14%
Market Cap
$82.75 billion
Rev. per Employee
$659,586
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/zigman2/quotes/207561596/composite
US : U.S.: Nasdaq
$ 27.95
-0.34 -1.20%
Volume: 4.47M
Sept. 19, 2019 4:00p
P/E Ratio
9.52
Dividend Yield
3.43%
Market Cap
$20.31 billion
Rev. per Employee
$429,030
loading...
/zigman2/quotes/204092533/composite
US : U.S.: NYSE
$ 40.71
+0.24 +0.59%
Volume: 1.83M
Sept. 19, 2019 6:30p
P/E Ratio
8.88
Dividend Yield
3.73%
Market Cap
$4.36 billion
Rev. per Employee
$161,332
loading...
/zigman2/quotes/210293917/composite
US : U.S.: Nasdaq
$ 65.96
+0.24 +0.37%
Volume: 4.20M
Sept. 19, 2019 4:00p
P/E Ratio
14.28
Dividend Yield
3.82%
Market Cap
$83.54 billion
Rev. per Employee
$2.02M
loading...
/zigman2/quotes/209237603/composite
US : U.S.: NYSE
$ 215.23
-1.85 -0.85%
Volume: 1.61M
Sept. 19, 2019 6:30p
P/E Ratio
9.03
Dividend Yield
2.32%
Market Cap
$77.39 billion
Rev. per Employee
$1.34M
loading...
/zigman2/quotes/203856914/composite
US : U.S.: NYSE
$ 142.97
+0.75 +0.53%
Volume: 3.18M
Sept. 19, 2019 6:30p
P/E Ratio
14.78
Dividend Yield
4.53%
Market Cap
$126.65 billion
Rev. per Employee
$208,845
loading...
/zigman2/quotes/206215053/composite
US : U.S.: NYSE
$ 25.82
+0.60 +2.38%
Volume: 10.14M
Sept. 19, 2019 6:30p
P/E Ratio
12.66
Dividend Yield
2.48%
Market Cap
$20.68 billion
Rev. per Employee
$269,849
loading...
/zigman2/quotes/210414114/composite
US : U.S.: NYSE
$ 48.80
-1.29 -2.58%
Volume: 2.85M
Sept. 19, 2019 6:30p
P/E Ratio
10.74
Dividend Yield
5.49%
Market Cap
$7.77 billion
Rev. per Employee
$156,814
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/zigman2/quotes/200637338/composite
US : U.S.: NYSE
$ 85.91
0.00 0.00%
Volume: 392,799
Sept. 19, 2019 6:30p
P/E Ratio
10.80
Dividend Yield
2.54%
Market Cap
$5.14 billion
Rev. per Employee
$733,040
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/zigman2/quotes/209297588/composite
US : U.S.: Nasdaq
$ 54.43
-0.50 -0.91%
Volume: 2.26M
Sept. 19, 2019 4:00p
P/E Ratio
13.94
Dividend Yield
3.53%
Market Cap
$12.95 billion
Rev. per Employee
$601,456
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/zigman2/quotes/203416310/composite
US : U.S.: NYSE
$ 141.00
-0.20 -0.14%
Volume: 2.25M
Sept. 19, 2019 6:30p
P/E Ratio
12.75
Dividend Yield
3.26%
Market Cap
$62.78 billion
Rev. per Employee
$367,770
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/zigman2/quotes/203750923/composite
US : U.S.: NYSE
$ 89.01
-0.17 -0.19%
Volume: 1.75M
Sept. 19, 2019 6:30p
P/E Ratio
9.06
Dividend Yield
4.49%
Market Cap
$35.78 billion
Rev. per Employee
$1.21M
loading...
/zigman2/quotes/208854639/composite
US : U.S.: NYSE
$ 112.46
+0.25 +0.22%
Volume: 1.24M
Sept. 19, 2019 6:30p
P/E Ratio
12.78
Dividend Yield
2.77%
Market Cap
$23.57 billion
Rev. per Employee
$123,297
loading...
/zigman2/quotes/205095589/composite
US : U.S.: NYSE
$ 58.31
+0.09 +0.15%
Volume: 2.32M
Sept. 19, 2019 6:30p
P/E Ratio
11.79
Dividend Yield
5.48%
Market Cap
$123.50 billion
Rev. per Employee
$4.75M
loading...
/zigman2/quotes/201824240/composite
US : U.S.: Nasdaq
$ 52.94
-3.81 -6.71%
Volume: 10.59M
Sept. 19, 2019 4:00p
P/E Ratio
7.45
Dividend Yield
4.76%
Market Cap
$13.98 billion
Rev. per Employee
$263,814
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/zigman2/quotes/207417762/composite
US : U.S.: NYSE
$ 25.27
+0.09 +0.36%
Volume: 4.45M
Sept. 19, 2019 6:30p
P/E Ratio
11.43
Dividend Yield
5.34%
Market Cap
$7.25 billion
Rev. per Employee
$287,889
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/zigman2/quotes/203410933/composite
US : U.S.: Nasdaq
$ 54.57
+0.16 +0.29%
Volume: 4.41M
Sept. 19, 2019 4:00p
P/E Ratio
10.71
Dividend Yield
3.35%
Market Cap
$49.28 billion
Rev. per Employee
$380,198
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/zigman2/quotes/210598149/delayed
US : FactSet Prices
1,763.28
-0.50 -0.03%
Volume: 3.64M
Sept. 19, 2019 6:42p
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/zigman2/quotes/211347052/realtime
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BX : Tullet Prebon
2.20
-0.04 -1.59%
Volume: 0.00
Sept. 20, 2019 3:20a
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