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Tags: high-dividend stocks | walgreen boots | lazard | kinder morgan
OPINION

Bob Ciura: 3 Undervalued High-Dividend Stocks to Buy Now

Bob Ciura: 3 Undervalued High-Dividend Stocks to Buy Now
(AP)

Bob Ciura By Tuesday, 18 April 2023 09:48 AM EDT Current | Bio | Archive

Even though interest rates are rising rapidly, the average dividend yield in the S&P 500 Index remains low at 1.7%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.

Even better, investors can buy high-yield stocks when they are also undervalued, which could lead to high total returns in the coming years. The following 3 undervalued high dividend stocks have yields above 5%, and high total return potential.
 

Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance is the largest retail pharmacy in both the United States and Europe. Through its flagship Walgreens business and other business ventures, the $32 billion market cap company has a presence in more than 9 countries, employs more than 315,000 people and has more than 13,000 stores in the U.S., Europe, and Latin America.

On January 5th, 2023, Walgreens reported results for the first quarter of fiscal 2023. Sales dipped -1.5% and adjusted earnings-per-share slumped -31% over the prior year’s quarter, from $1.68 to $1.16, mostly due to high COVID-19 vaccinations in the prior year’s period. Earnings-per-share exceeded analysts’ consensus by $0.02. The company has beaten analysts’ estimates for 10 consecutive quarters. However, as the pandemic has subsided, Walgreens is facing tough comparisons.

The company expects earnings-per-share of $4.45-$4.65 in fiscal 2023. Based on this the stock has a 2023 P/E of 7.8. In addition the stock has a 5.3% dividend yield.

Lazard (LAZ)

Lazard Ltd. is an international investment advisory company that traces its history to 1848. The company has two business segments: Financial Advisory and Asset Management. The Financial Advisory business includes strategic, M&A, debt restructuring, capital raising, shareholder advisory, and sovereign advisory. The Asset Management business is about 80% equities and focuses primarily on institutional clients.

By geography, Lazard’s revenue is about 60% Americas, 30% Europe and Middle East, and 10% Asia Pacific. Revenue is almost 50% Financial Advisory and 50% Asset Management. At the end of Q4 2022, Lazard had roughly $216B in assets under management (AUM).

Lazard’s competitive advantage is derived from its reputation for excellence and integrity, worldwide reach, diversity in asset management, long-term relationships, and ability to advise on complex transactions. The company is often the go to firm for complex global M&A transactions and restructuring. The company’s reputation also permits it to attract top talent, which is important in the advisory business.

Lazard stock has become exceptionally cheap. Lazard is currently trading at a nearly 10-year low P/E ratio of 10.0 and is offering a 10-year high dividend yield of 6.1%. Total returns could exceed 12% per year.
 

Kinder Morgan (KMI)

Kinder Morgan is among the largest energy companies in the U.S. It is engaged in storage and transportation of oil and gas, and other products. It owns an interest in or operates approximately 83,000 miles of pipelines and 144 terminals.

Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide (CO2) and more. Kinder Morgan’s transportation assets operate like a toll road, whereby the company receives a fee for its services, which generally avoids commodity price risk. Approximately 90% of Kinder Morgan’s cash flow is fee-based.

On January 18th, Kinder Morgan reported its FY 2022 results and announced that its board of directors approved an increase in KMI’s share repurchase authorization from $2.0 billion to $3.0 billion. Since the program’s inception, KMI has repurchased approximately $943 million worth of shares at an average price of $17.40 per share, leaving a remaining capacity of approximately $2.1 billion.

The company also provided its 2023 outlook. It expects to generate net income attributable to KMI of $2.5 billion ($1.12 per share in line with the consensus) and declare dividends of $1.13 per share, a 2% increase from the dividends declared for 2022. The company also budgeted to generate 2023 DCF of $4.8 billion ($2.13 per share).

Shares trade for a 2023 P/DCF ratio of roughly 8. The stock also has a 6.3% dividend yield. The new dividend payout level seems to be secure, and the company utilized the savings from the dividend reduction to pay down debt and improve its balance sheet. Total returns could exceed 10% per year.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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BobCiura
Even though interest rates are rising rapidly, the average dividend yield in the S&P 500 Index remains low at 1.7%. As a result, income investors should focus on higher-yielding securities if they want additional income from their stock portfolios.
high-dividend stocks, walgreen boots, lazard, kinder morgan
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2023-48-18
Tuesday, 18 April 2023 09:48 AM
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