10 Dividend Stocks For Value And Growth: Not Value Versus Growth | FAST Graphs

[Music] hello everybody this is chuck carnevale co-founder of fast graphs the fundamentals analyzer software tool many of you know me as mr evaluation that's kind of germaine to this particular video because what i'm going to talk about is growth and value you know typically in wall street when you hear the subjects of growth investing or value investing discussed it's usually discussed separately it's either value versus growth or growth versus value as if one is you know contra or against the other and that's really a pet peeve of mine because frankly in my view if you're talking about investing whether you're investing in growth stocks or dividend-paying stocks or bonds or anything you know else for that matter real estate etc to me you can only utilize the word investing when value is associated with it anything that isn't value quote-unquote investing is speculating and there's a fundamental difference you know i've gotten a lot of heat and feedback you know i talk about my favorite stock in the planet apple and i talk about how it's overvalued how much i like the company how how impressed i am with its business etc i'm just not going to buy it at these prices that would put me as the greater full where i'm foolishly paying more for even my favorite stock on the planet simply on the basis that a full greater than me is going to come along and pay more i want to have fundamentals underpinning all the investments i look at but rather than think of it as growth versus value as if there's a contest going on i like to think of it as growth and value because to a great extent value and growth are actually joined at the hip almost every stock grows the difference is how fast they grow utility stocks for example tend to be very slow growers tech stocks tend to be much faster growers but there's always growth associated with it and here's the important part when you're talking about value value is functionally related to growth in other words the future growth of the stock is going to be a major component of how you actually calculate and assess whether the stock is trading at fair value or not so i see the two as joined at the hip so let me go ahead and move and talk about the seven i put together here ten stocks that have the attributes of both growth and value and i'm going to go ahead and go through this i call these research candidates because these are not stocks that i'm necessarily suggesting that you invest in today but they are stocks that i think you can consider now here's the deal you know this is the s p 500 you know through the lens of fast graphs the orange line on the graph is a p e of 15. the blue line on the graph is simply another valuation reference that kind of calculates how the market has valued the stock historically on average but the point is when you're looking at these lines you can see when the when it's above the blue line the p e is higher than 17 when it's below the orange line the p e is below 15 when it's touching it it's approximately on the 15 or it'd be approximately on the blue line of 17. you know five or six times earnings and of course you can see the s p is very very highly overvalued now so what i said was you know i want to talk about growth now to get a little more detail into this if i'm really talking about growth where i'm looking for total return you know capital appreciation then i start to define growth i like to look at stocks that are growing by about 15 or less in today's world that's very hard to find so you can adjust that a little bit down to about 10 or better okay so i'm looking for companies that have double digit growth let's put it that way and so the screening criteria i utilized for this video was i looked for companies that were growing at 10 or better estimated future growth i'm talking about i looked for companies that had earnings yield of at least six percent because that gets me in my value criteria i prefer higher than six but six was my minimum i'm looking for investment grade company so i limited it to triple b minus or better and then in this particular screen i also wanted the stocks every stock that i showed you to pay a dividend so when you've got this very highly inflated you know marketplace here it was very hard for me to come up but i was able to come up with 10 stocks that i think would make excellent research candidates that have you know good long-term growth potential at least over the next two to three years so you know these are the ten names i will be covering in the video the estimated growth you can see all of them are above 10 they all have credit ratings above triple b minus they all have earnings yields of over six percent i can sort these you can see the lowest is anthem at 6.1 percent the highest would be equitable holdings with an earnings yield of 14.97 from a growth point of view if i you know put them in order citizens financial has the lowest estimated growth in about 10 percent and borg warner would actually have the highest growth forecast of about 18.35 growth in value or joined at the hip now i've got a pretty diverse 10 group of companies here now as far as dick sectors you know financials dominate there's an awful lot of financial stocks that are you know reasonably priced today but even in the financials i've got diversification a lot of people get confused i've got a regional bank i've got diversified financial services and equitable they're famous for their bernstein mutual funds you might know them by that name better than equitable health and then i have jp morgan which is a big money center bank and then li financial which is actually consumer finance so even though they're all financials they're different same with health care i've got mckesson which is a healthcare distributor and then i've got cigna which is healthcare services and you get the drift you know so i've got some good diversification here these are 10 stocks that you can look at for growth now what i'm going to do is i'm going to go through these and i'm going to utilize the new version of fast graphs and i'm what i'm trying to do here is just give you some upgrades you know it's been very frustrating for us we're trying to get this launched we want to make sure we launch it correctly one area that i do have working pretty well is the classic fast graph the historical fast graph as well as the forecasting tool and we just made some enhancements on our performance section as well so we're getting closer every day guys and you know we're looking forward to bringing this up because one of the advantages is speed but we'll talk more about that you'll see i'm going to actually show you the speed as i go through these stocks so let's start with anthem this is a stock i've talked about you know quite a bit it has a blended adjusted earnings yield of about 6.16 percent moderate dividend yield but the dividend growth record which they've only been paying a dividend i want you to notice since 2011 so when i do performance and focus on the growth rate of the dividend the average growth rate's been about 16.59 the compound or average growth rate has been 15.999 so roughly 16 dividend growth i think that's the important factor here as far as going forward if you look at this stock and i'm only going to look at this through 2023 by the way that's you know that's where i'm limiting it and like this just is a part of the tool that we don't have dividends plotted there yet so i'm going to go out to 2023 which is as far out as i want to go and i'm looking for stocks here when i did this screen candidates that could give me a 10 rate of return now what that 10 rate of return is based on is a forecast growth rate of 13.34 which qualifies it as a 15 multiple or you know p e ratio which is what the orange line is you'll notice on the graph here and that goes out you know if if the stock traded at a 15 pe and that would you know give me a little bit of pe contraction because the current blended p e ratio for this stock currently is about 16.22 okay so what i'm saying here is this is fully valued not necessarily undervalued but i you know it's a very high quality company a rated i could generate a 10 rate of return going forward so my first research candidate here is anthem and i don't have these in any particular order my next one would be borgwarner now borgwarner is a little bit cyclical of course you know it's auto parts and equipment you've seen their products i'm sure in auto parts stores etc i do want you to note that the historical growth rate of this company has been about 9.74 but if i shorten this time frame significantly it does get me above my 10 threshold that i'm looking for from a standpoint of forecasting it does have a very a nice forecast growth rate of about 16.5 percent but that's going out almost five years if i limited it to just 20 23 it would be closer to 18 but if i bought this stock today and it traded at a p e ratio of 16.5 and here i'm using the p equals growth rate formula so the orange line in this example would be a p e of 16.5 that would indicate over the next two and a half or you know two plus going on three years i could generate an annualized rate of return of twenty five point seven seven percent growth and value are joined at the hip this is looking at a stock that is would technically be classified as a growth stock that i can buy at an attractive value and that's the message i want to keep getting across here now here's equitable holdings which again is a you know diversified financial services company once again the stock is very inexpensive the p e is only 6.68 and it's got almost a 15 earnings yield which is very very strong if i look at this going out to 2023 and it did trade at a 15 p e ratio which i would consider you know fair value for this stock then you'd be looking at making almost 50 rates of return if this traded at its normal multiple which has been you know significantly lower then you might be looking at a much lower rate of return but the point i want to make is i believe this stock is you know should be trading at a 15 pe so this one would have an element of speculation involved if you were going to consider equitable it's just so ridiculously inexpensive has almost a two percent dividend yield and you can buy it for less than seven times earnings that's pretty incredible if you believe that stocks you know will eventually revert to the mean citizens financials another financial this is a regional bank it's got very strong earnings forecast for this year the company again is triple b plus rated offers about a 3.37 percent current yield which is one of the highest in the group here but if i go out to 2023 again i do want you to note that you know this has double digit 15 plus rates of return but i always want you to see where these returns are coming from the majority of that is based on the strong forecast for this year followed by some weakness and then recovering back to approximately a 10 growth rate again if i look at the company historically there is you know a certain element of cyclicality that's been involved with this company historically but again it's triple b plus you know reasonable debt levels real nice dividend yield you know earnings yield about six and a half percent trading at a 15.5 p e ratio but strong growth expected for this year the next one would be jp morgan which all of you you know i'm sure familiar with a minus rated i've got a 6.67 percent earnings yield which is precisely a 15 pe two and three quarter percent dividend yield if i look at this company going forward based on its expected growth out to 2023 i would only have about a seven percent return if it stayed at this low multiple but if i went and looked at it from a standpoint of what i would consider to be fair value which would be a 15 pe you stand to make double digit returns of about 12.27 going forward i want to mention this you know blue line concept you can see there are times when the stock moves back into a 15 pe as it has now but financials you know ever since coming out of the great recession you know financials have traded that sort of a discounted valuation i do want you to note that you know between the last two recessions of 15 pe which is the orange line in this graph was very quite common for these financials and you can see it does have a penchant for moving back towards that pe line as it is right now so i believe you know a 15 pe would be the proper evaluation reference to utilize for jp morgan chase i think it's an excellent candidate here the next example would be mckesson which is a health care distributor this is a company that's historically always traded at a 15 pe it's had 13.77 percent historical growth the current pe is under 11. you know that has to all that has to do with you know what we saw with the opioid pandemic etc these stocks all seem to be recovering from that if i look at it out to 2023 like i have with everything else and go out here that i'm looking at a 30 annualized rate of return with this would be a function of the p e ratio going from the current 10.8 up to a more rational or more normal or a fair value intrinsic value pe of 15. this stock has a very very nice margin of safety in it relative to some of the others i've shown you here which is one reason i like it the dividend yield is light it doesn't pay you know the payout ratio is very low but as this company grows you know the dividend payout ratio could easily expand it already has expanded from when it first came out with you know a single digit dividend payout ratio now it's up to a double digit 11 payout ratio and that significantly could go significantly higher in the future which tends to happen with dividend paying stocks over time the next is air lease referred to as a trading company but there at least a very interesting company they lease aircraft for commercial use etc the company's forecast growth rate in this example is about 16.46 so using a 16 p e ratio going out to 2023 this stock could generate 35 to 40 percent annualized rates are returned the stock has a dividend yield of 1.3 percent an earnings yield of 22.52 that's extraordinary a company's trip will be rated but again you know i think this stock is worth a 15 pe it's out of favor right now but i do also want you to notice that just in the last few years here or you might say a year or so this company's really had some really good performance it looks to me like it's moving back into alignment with its intrinsic value the next one is one that i've talked about before now cigna is starting to pay a four dollar dividend they used to pay a very minuscule dividend but now the company's getting a little bigger and they're going to be increasing their dividend to four dollars a share and that will give you a much higher yield than what we're currently showing on the graph so that's something to look forward to from a forecast point of view the company is expected to grow at around 12 a year this means that if you bought the stock today at a blended p e ratio of 13.09 and a earnings yield of 7.64 i believe this would be a very attractive candidate to look at the company's a minus rated i like this one very much and i think it would be a great candidate for for growth and value not growth versus value but growth and value remember that's the theme uh jbl circuit which is a st petersburg florida-based company kind of a hometown company a little bit cyclical but it's a tech stock expected to have very high growth this year followed by seven percent and seven percent it all ravages out to about 14.78 percent this would you know give you the opportunity to generate almost a 25 annualized rate of return if it reversed to the mean it gets back to the 15 p e ratio which this company is historically traded at many times so that's another case of growth and value here's a consumer finance company li financial you can see it's expected to have a strong growth rate which you know makes a lot of sense considering what's going on with interest rates and investing today looking at the forecasting calculator here we're looking at over 100 percent earnings growth which is recovering from covid you know so we're looking at a 14.3 percent average growth rate going out to 2023 that would give us the potential to make over 30 percent annualized so again one and a half percent dividend yield which is close to market neutral the key element here is that these stocks are growth in value stocks they're not value stocks they're not growth stocks they're growth in value stocks and i and again to reiterate i believe that all investing has to be considered value investing now you can invest for value and growth okay but if you're investing in growth stocks and you're paying extraordinary valuations for them you're speculating you're not investing if you want to call it investing you've got to apply the principles of value and look for fundamentals supporting your investment because in the long run that's how you're going to win anyway i hope you enjoyed this video it's chuck harnell saying thanks for watching you know give me a like ring the bell subscribe to the channel give me a thumbs up do all those nice things for me i appreciate you as always and look forward to talking to you again very soon thanks for watching

Channel: FASTgraphs

Views: 10,883

Rating: 4.9888577 out of 5

Keywords: value and growth, value adn growth, value and growth stocks, value and growth portfolio, value and growth investing, value adn growth stocks, value adn growth investing, Mr. Valuation, valuation, dividends, growth and value, earnings yield, growth, FAST Graphs, fastgraphs, investing, stocks, markets, Anthem, ANTM, BorgWarner, BWA, Equitable Holdings, EQH, Citizens Financial, CFG, JP MOrgan, JPM, McKesson, MCK, Air Lease, AL, Cigna, CIC, Jabil, JBL, Ally Financial, ALLY, Dividend growth

Id: UOTDDGlCRLY

Length: 17min 55sec (1075 seconds)

Published: Mon May 03 2021