Are These 6 Dividend Stocks Under 10 Dollars Undervalued?
James Dennin, Kapitall: These dividend stocks under 10 dollars look cheap, and have lots of cash on hand for small caps.
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Gold and bond yields have outperformed the S&P 500 and Japanese Equities, both among the best performers of 2013.
Bonds have risen as investors gauge what is by most indicators a strengthening economy, illustrated by a recovering housing market and an uptick in consumer spending after a particularly dreary winter.
Improving economic data is usually interpreted by the markets as a sign that interest rates will soon start to rise.
One option for investors looking to play a growing bond market is to turn to bond ETFs – however, a contrarian investor might look to dividend stocks, which trade inversely to bonds.
That's because dividend stocks offer some of the safety of bonds with a guaranteed return – assuming the stock's price doesn't go down. To further hedge against the risk of that happening, we decided to build a list of dividend stocks that were undervalued.
To do that, we looked at levered-free-cash-flow, which is the amount of cash a company has on hand after paying off its costs and paying down its debt.
When a company has a high amount of cash relative to its enterprise value (another way of saying size), the company is said to be undervalued.
We screened a list of all the dividend stocks that trade on major exchanges for stocks that trade between $5-$10 and have high amounts of levered-free cash flow. We were left with six companies on our list.
Click on the interactive chart to view data over time.
1. Cia Energetica de Minas Gerais (CIG): Engages in the generation, transformation, transmission, distribution, and sale of electric energy primarily in Minas Gerais, Brazil. Market cap at $7.12B, most recent closing price at $5.66.
Levered free cash flow at $1.28B vs. enterprise value at $9.01B (implies a LFCF/EV ratio at 14.21%).