Written by Brett Owens (ContrarianOutlook.com)
Most dividend stock prices are on the high side, but, believe it or not, there are a few quality dividend growers that are still pretty cheap…There aren’t many firms growing their payout meaningfully every year and selling below book today… [but here are] 5 dividend growers at “free lunch” prices today.
1. Metlife, Inc. (NYSE:MET) is the cheapest big name on the board, trading for 85% of book. Insurers are like banks – when you see them trading below book, you should immediately ask yourself: “Why?” If you can then debunk the headline concerns, you should then buy.
In recent years, insurance stocks had fallen out of favor, with low interest rates to blame. Reason being, insurance firms typically invest their float – the premiums they collect – into safe interest-bearing securities for additional income. Low rates bring low insurance profits.
Many insurers rallied along with rates beginning last August, but Metlife has lagged. MET is getting set to spin off its US retail business, while at the same time arguing for the removal of its designation as a “systemically important financial institution,” and the costly regulatory burdens that come with it. The spinoff and/or progress on the SIFI front may spark the stock to catch up with its peers – and its dividend, which is up 45% in the last four years.
2. Reinsurer Everest Re Group Ltd. (NYSE:RE) has rallied above its liquidation value, but it still trades for just seven times free cash flow (FCF). That’s “easy money” for management, which loves to repurchase shares when they are too cheap. Over the last five years, they’ve bought back nearly one-quarter of the company while boosting their payout by 160%:
3. Prudential Financial Inc. (NYSE:PRU) has been a dedicated regular on my “too cheap” list. Last May I said it had 25% upside, and that proved conservative – the stock has rallied 34% in just 11 months.
