When working on my stock considerations for the month, I like to use the CCC spreadsheet which is run and maintained by Dave Fish. When looking at the spreadsheet, I like to add my own data filters. This helps me find companies that meet my set of criteria. After the filters were added, I now had a list of companies that I can start researching. This is how I came up with the four stocks listed today.
AT&T Inc. (T)
ATT currently has a dividend yield of 5.82%. The 5-year average is 5.2%. I like to look at this dividend yield of today vs. the 5-year average because it helps me determine if the company is worth my time for further research.
The next question I like to ask myself is “Can ATT continue to pay this dividend?”
The answer is yes, ATT can.
ATT has a dividend payout ratio of 91%. This payout is a lot higher than what I normally like. However, when looking at the Free Cash Flow Per Share and comparing it to the dividend we get a payout ratio of 70%. This tells me that ATT does have the cash to continue to payout this fantastic dividend.
Another metric I like to look at is the current PE, the PE 5-year average, as well as Forward PE.
Right now ATT sits at a PE of 15.8 with a 5-year average of 27. This tells me that ATT is extremely undervalued compared to its 5-year PE average. Not only is it undervalued now, but its forward PE is 11.2.
Here we have a chart from F.A.S.T. Graphs and whenever the black line is under the orange/blue line, it is considered to be undervalued. Here we see that ATT is indeed undervalued since it is under both the blue and orange line.
Cardinal Health Inc (CAH)
CAH currently has a dividend yield of 2.86%. The 5-year average is 2.0%.
The next question I like to ask myself is “Can CAH continue to pay this dividend?”
The answer is yes, CAH can.
CAH has a dividend payout ratio of 45%. This is very low. This kind of payout gives a company like CAH a lot of room to continue to grow its dividend. As you see in the chart below, CAH earnings are expected to continue to grow.
Now let’s look at CAH current PE, the PE 5-year average, as well as Forward PE.
Right now CAH sits at a PE of 16.07 with a 5-year average of 27.3. We see here again that CAH is undervalued when comparing to its 5-year PE average, and CAH is sporting a forward PE is 13.5.
In this chart, we see that CAH is certainly undervalued since it is under both the blue and orange line.
CVS Health Corp (CVS)
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