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5 Dividend Stocks On Sale: Meredith Corp (MDP), Western Union (WU) And More

Added on by Gordon Gekko .

Be sure to check out our detailed stock analysis (click here). Amidst an economic backdrop where the 30-year U.S. treasury bond rates are 3.0% and the Fed plans to keep target interest rates at historical lows through 2015, it's not a bad time to take a look at some dividend stocks that offer yields in excess of treasuries.

What's more is that the five stocks below not only offer dividend yields of at least 3.3% (except one, which has an up-and-coming dividend), but also have the opportunity for price appreciation. These stocks all have PEG ratios of 1.0 or below, expect one, meaning the stocks are impressive "growth at a reasonable price" opportunities. A PEG below 2.0 is cheap, but a PEG of 1.0 or below is very cheap.

On top of all this, all these companies pay out less than 60% of their earnings in the form of dividends, leaving a "margin of safety" for these dividend payments in times of tough economic times (also check out 5 high yielding low-vol stocks).

  • Meredith Corporation (MDP) pays a 4.3% dividend yield, on a48% earnings payout; this coupled with its 1.0 PEG ratio makes the media company cheap.

The media company has been helped with some strong circulation and advertising revenues, which has been boosted with increased readership and online traffic. This helped boost last quarter earnings to $0.89, slightly above consensus, but up 27% year over year.

Recent highlights include the fact that management has reiterated its fiscal 2013 earnings guidance of $2.60 to $2.95 per share; being driven by the company's entry into online platforms, television and tablets in hopes of capturing more market share.

More than half of Meredith's revenues are derived from advertising, but the company is making strides to hedge this exposure, and I view the falling apart of the deal to purchase Time Warner's Time magazines a long-run positive for the company (read more about the Time Warner-Meredith deal).

As far as trying to move away from strictly advertising, Meredith recently acquired online marketing firms Genex, New Media Strategies, and Healia, and a mobile marketing firm, The Hyperfactory.

Meredith has an impressive dividend, paying a dividend continuously since 1947, and has been increasing it for the last 19 years. Over the last 10 years, the company has increased its dividend payout at an average annualized rate of 16%.

  • Textainer Group Holdings Limited (TGH) has a 4.4% dividend yield and a 41% payout, and this on top a 1.0 PEG ratio.

Textainer is the world's largest lessor of intermodal containers with a total fleet of more than 1.3 million containers. It leases containers to more than 400 shipping lines and other lessees, including each of the world's top 20 container lines. It is also the primary supplier of leased containers to the U.S. Military. The goal is to be the most reliable lessor of containers in locations where its customers need them.

It also is one of the largest purchasers of new containers and the largest sellers of used containers. Its balance sheet also appears to be solid with an interest coverage ratio of 3.5 times, as well as being able to generate 24% return on equity over the last 12 months. TAL International is another notable shipping-related stock that pays a very robust dividend yield at 6% (read more about TAL other other cheap dividends).

  • The Western Union Company (WU) pays a 3.5% dividend yieldon a 55% payout of earnings. This payments company also has one of the lowest PEG ratios of the five at 0.8.

Western Union is a key business in payment processing, with a recent focus on entering the cross-border payments market for small to medium-sized businesses.

Western Union also acquired the global business payments division of Travelex, which provides international payment services to businesses and gives Western Union a presence in 16 more countries. Management even expects that the combined Travelex and Western Union business segment will grow revenue at 10% annually over the next three years.

Other key entries into emerging markets includes embarking on the fast growing markets of China and India. Western Union has already amassed 200,000 locations across China, India and the rest of Asia.

Western Union also trades cheaply compared with its peers, such as H&R Block and Coinstar. Trading at 9 times 2012 earnings, the company is 30% below its peers' average P/E.

Western Union has a "wide moat" with free cash flows being 15 - 20% of revenue and boasting a return on invested capital in excess of 25% (read more about its moat here).

  • Olin Corporation (OLN) has a 3.3% dividend yield with a 47% payout ratio, and a PEG ratio that's relatively high at 1.7, but the stock is still cheap.

Olin Corporation is a manufacturer concentrated in chemicals, metals and ammunition, a rather diversified product mix. Its chemicals includes pool chemicals, and its metals and ammunition segment produces copper alloy sheets, rods and wire, and ammunition. A positive for the ammunition segment is the potential stricter gun control laws, which will drive demand for ammunition up in the interim in anticipation of such laws being passed.

As far as valuation is concerned, Olin's current price to earnings ratio is 75% that of the S&P 500 P/E; whereas its 10-year average is a premium to the market, averaging 115%. Thus, its P/E should be closer to 18.5 times earnings, which on a 2012 EPS of $1.85 suggests the stock is undervalued by almost 30%. Olin also saw a notable upgrade after a blockbuster earnings release (see more about the upgrade).

  • Ameriprise Financial, Inc. (AMP) pays the lowest dividend yield at 2.5% and also has the lowest dividend payout of around 24% or earnings; meanwhile, the stock has a compelling PEG of 1.0.

One of the biggest positives about Ameriprise is the fact that the company has also managed to grow its dividend payment by an average annual rate of 25% over the last five years.

Ameriprise operates as a well-diversified portfolio compared with its industry peers, with peers including the likes of the Blackstone Group and Franklin Resources. However, it still trades on the cheap; trading around 12 times earnings, but peers trade around 15 times. Moreover, on a price-to-book basis, the shares trade at 1.3 times, which is a significant discount the industry average of 2.3.

Source: http://seekingalpha.com/article/1278081-5-...