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These 10 U.S. dividend stocks offer quality, stability and attractive valuations

By

Gary Christie

on

June 6, 2022

What are we looking for?

U.S.-listed large- and mid-cap stocks indicating below average valuations and above average yields relative to the broad S&P 500 index.

The screen

It is impossible to know whether we will retest the S&P 500′s record high on Jan. 4 any time soon. Despite the recent short-term rally, a long-term bear market is quite possible. Regardless, today we’re looking for U.S. names indicating attractive valuations and income metrics that can weather current market volatility.

We will be using Trading Central Strategy Builder to search for U.S. stocks that are indicating below average price-to-earnings ratios and above average dividend yields supported by a proven track record of dividend growth.

We begin by setting a minimum market capitalization threshold of US$5-billion. We wish to focus on larger, more established companies in the U.S. market owing to their inherent quality and stability.

Next, we will apply two dividend-related criteria to our screen.

  • We will select only companies with dividend yields of 2.5 per cent or more, which tops the 2 per cent yield currently indicated for the S&P 500.
  • We like companies that have a track record of raising their dividend payments over time. We screened for stocks indicting a five-year average dividend growth rate of at least 15 per cent.

In order to avoid companies that are highly leveraged in a rising rate environment, we screened for companies that are indicating a debt-to-equity ratio that is less than one. The higher the ratio, the more leveraged the company is.

Finally, we were interested in companies that are indicating a price-to-earnings ratio less than 15. The average P/E of all stocks in the S&P 500 is currently 20.

We have also included year-to-date and one-year price performance for your reference.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities.

What we found

Ten U.S. dividend stocks offering quality, stability and attractive valuations

Our screener ranks the list based on all performance and revenue criteria. Of 10 names in total, eight banks made the list, suggesting the banking sector may be indicating a great value opportunity amid rising interest rates.

Topping our list is financial holding company Popular Inc. which provides retail, mortgage and commercial banking products and services in Puerto Rico, the mainland United States and the British Virgin Islands. The company has the second-lowest market cap and P/E on our list at US$6.2-billion and 7.3 respectively. The stock is indicating a dividend yield of 2.7 per cent and a five-year average dividend growth rate of 18.4 per cent.

Hewlett Packard Enterprise Co. is the only technology company to make the list. It has the cheapest stock price on our list at around US$15 and the lowest P/E at 5.6. The stock is indicating a dividend yield of 3 per cent and a five-year average dividend growth rate of 16 per cent.

Trading Central Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described outperformed the broad market with an 18-per-cent annualized total return compared with a total return of 11 per cent for the S&P 500. The one-year screen performance is an impressive 37-per-cent total return compared with a decline of 2 per cent for the S&P 500, on a total return basis.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Gary Christie is head of North American research at Trading Central in Ottawa.

The investment ideas presented here are for information only.  They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing. Learn more.

Gary Christie

Head of North American Research
Gary has over 15 years in financial markets. Prior to joining TC, he served as an equity & derivatives specialist with TD Bank and Bank of America. Gary is regularly quoted in Bloomberg News, conducts many education and market outlook webinars for investment institutions all over the world and has been a guest speaker at the New York Traders Expo.
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