Zacks Investment Ideas feature highlights: Rogers Communications, Kohl's and
CHICAGO, May 17, 2013
CHICAGO, May 17, 2013 /PRNewswire/ --Today, Zacks Investment Ideas feature
highlights Features: Rogers Communications (NYSE:RCI), Kohl's (NYSE:KSS) and
3 Dividend Stocks at Reasonable Prices
There's a new acronym gaining momentum in the investing world: FOBOR.
It stands for FOrced Buyers Of Risk. What it means essentially is that due to
aggressive monetary policies by central banks, investors have basically been
forced out of fixed income assets like bonds and into riskier assets like
Many of these FOBORs are institutional investors like pension funds that rely
on steady income streams to meet their liabilities. And simply a sub-2% yield
on a 10-year Treasury note isn't going to cut it. So they shift their money
into high yielding - and riskier - assets.
Considering that the yield on the 10-year Treasury note is currently less than
the dividend yield on the S&P 500, this move isn't surprising. Since 1962,
this spread has averaged +3.54%, as you can see in the chart below:
The More Boring the Better
FOBORs are reluctant stock investors, so most prefer the lowest beta, most
stable dividend stocks out there since they are used to the safety of bonds.
This move has driven stock prices in many "boring" stocks to record highs.
Defensive Too Expensive?
Bubble might be too harsh of a word. But defensive stocks certainly look a
little frothy here.
While low beta dividend stocks are becoming harder to find at a reasonable
price, there are still some pockets of value out there.
3 Low Beta, Reasonably Priced Dividend Stocks
I ran a screen in Research Wizard that searched for the following criteria:
oDividend yield greater than 2.5%
oForward P/E ratio below 15
oPrice to cash flow ratio below 10
oBeta less than 1
oA history of rising sales and EPS
oA history of rising dividends
oZacks Rank of 3 (Hold) or better
Here are 3 of my favorite names from the list:
Rogers Communications (NYSE:RCI)
Dividend Yield: 3.7%
Forward P/E: 14x
Price/Cash Flow: 7x
Rogers Communications is a Canadian communications and media company engaged
in the telecom and media businesses. The company operates in three segments:
Wireless, Cable & Business Solutions, and Media. Rogers generates strong and
stable cash flows which it has used to increase its dividend at a 12% compound
annual growth rate over the last five years.
Dividend Yield: 2.7%
Forward P/E: 11x
Price/Cash Flow: 6x
Kohl's operates 1,155 department stores in 49 states. The company has
delivered steady sales and earnings growth over the last decade and began
paying a dividend in 2011. Kohl's also recently delivered a big first quarter
earnings beat that should drive analysts' earnings estimates meaningfully
Dividend Yield: 3.3%
Forward P/E: 10x
Price/Cash Flow: 6x
Chevron is a global energy company primarily focused on the exploration and
production of oil. Although the company is dependent on oil prices, which can
be very volatile, Chevron has managed to increase its dividend at an 11%
compound annual rate over the last 10 years and did not cut its dividend
during the Great Recession.
The Bottom Line
Forced buyers of risk have driven valuations higher in many stable dividends
stocks. But these three low beta stocks still offer strong yields at
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