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Cheap Dividend Stocks

Russ Krull
February 22, 2012

Barron's feature article this week is on the top 1,000 investment advisors in the U.S. I thought the most interesting line in the report was in the subtitle: "Their single biggest recommendation: Buy dividend stocks."

My Foolish colleague Morgan Housel recently made a convincing case that valuations in the dividend-stock universe are getting rich as investors reach for yield. Dividend stocks are popular here at the Fool and I'm both a fan and a cheerleader. But it's concerning as a contrarian for me to see any investing approach getting popular.

With dividend-stock prices bid up, are there still good bargains out there? A screen should help answer that question. I wanted to find out if there are still stocks trading at a discount to the market, but with above-market dividend yields and solid balance sheets. To get the answer, CAPS screener was run with the following parameters:

  • Price-to-Earnings ratio positive and under 15
  • Dividend yield above 2.5%
  • Long term debt-to-equity ratio less than 1.0
  • Revenue and earnings growth rate both over 5% for the last three years
  • Market capitalization greater than $250 million
  • CAPS rating of four or five stars (out of five)

The screen kicked out 33 stocks covering a variety of sectors, including these five:

Company Name


Price-to-Earnings (TTM)

Dividend Yield

CAPS Rating

Statoil (NYSE: STO  ) Basic Materials 6.5 3.5% *****
3M (NYSE: MMM  ) Conglomerates 14.7 2.7% *****
Aflac (NYSE: AFL  ) Financial 11.5 2.7% *****
Walgreens (NYSE: WAG  ) Services 11.8 2.6% ****
Intel (Nasdaq: INTC