{"id":47917,"date":"2023-08-13T10:18:11","date_gmt":"2023-08-13T14:18:11","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/this-5-stock-value-portfolio-yields-4x-the-market\/"},"modified":"2023-08-13T10:18:14","modified_gmt":"2023-08-13T14:18:14","slug":"this-5-stock-value-portfolio-yields-4x-the-market","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=47917","title":{"rendered":"This 5-Stock Value Portfolio Yields 4X The Market"},"content":{"rendered":"
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Let\u2019s talk about the cheapest dividend payers in the world. With respect to cold hard cash flow<\/em>.<\/p>\n

We contrarians are too savvy for P\/E ratios. We know that earnings are accounting<\/em> creations. \u201cProfits\u201d are all fugayzi<\/em>.<\/p>\n

Free cash flow (FCF), on the other hand, is what it is. The cash a company brings in, minus capital expenditures. This cash can be reinvested in the business or, better yet, paid out to income investors like us.<\/p>\n

We like companies that dish dividends because their businesses are running on relative autopilot. They needn\u2019t plow every dollar they raise back in. Which is great\u2014more yield for us<\/em>.<\/p>\n

Here are five cheap dividend payers (with respect to FCF!) yielding an average of 6%.<\/p>\n

Coterra Energy (CTRA)<\/strong><\/p>\n

Dividend Yield: <\/strong>6.0%<\/p>\n

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Forward P\/FCF:<\/strong> 6.1<\/p>\n

Coterra Energy (CTRA) <\/strong>is perpetually cheap.<\/p>\n

This oil, natural gas and natural gas liquids (NGLs) company has popped up on my radar again and again and again and again in recent months. It sprang to life just a couple years ago, in 2021, when Cabot Oil & Gas and Cimarex Energy merged to form it. It\u2019s a major player in Texas\u2019 and New Mexico\u2019s Delaware Basin, also boasting acreage in the Marcellus and Anadarko basins.<\/p>\n

Energy has given us little to celebrate in 2023, woefully underperforming the rest of the market with virtually flat performance. But Coterra has shown signs of life of late, with a beat-and-raise quarter justifying its recent run. Among other things? Oil, nat-gas, and NGL production were all better than expected, leading it to raise its full-year guidance.<\/p>\n

I\u2019m not surprised. I\u2019ve previously said that Coterra is a strong operator in the space that\u2019s more talented than most at wringing money out of each drop of oil, and its results continue to reiterate that.<\/p>\n

However, I\u2019ve also mentioned previously that Coterra is a difficult holding for long-term income because of its fixed-and-variable<\/strong> dividend\u2014it pays out a base dividend (that increased from 15 cents quarterly to 20 cents this year), then variable dividends as cash flows allow. However, CTRA made a slight adjustment to its policy this year\u2014one that prioritizes share buybacks over variable dividends. Specifically:<\/p>\n

\n \u201cDue to market conditions and the value proposition of our shares, in 2023 we are realigning our strategy to focus on buybacks ahead of variable dividends. Our 2023 capital return priorities include paying our increased base dividend first, share repurchases second, and variable dividends third.\u201d<\/em>\n<\/p><\/blockquote>\n

So unless something changes drastically, that 6% yield\u2014based off of Coterra\u2019s trailing 12-month yield, which I use for fixed-and-variable stocks\u2014is likely to drop to about 3% if CTRA continues only paying its base rate.<\/p>\n

Ford (F)<\/strong><\/p>\n

Dividend Yield: <\/strong>4.7%<\/p>\n

Forward P\/FCF:<\/strong> 4.0<\/p>\n

Ford (F)<\/strong> is one of the most recognizable automotive names on the planet. Its flagship F-series pickup trucks have been America\u2019s top-selling vehicle for roughly four decades, though in recent years, it has been trying (and in several ways, succeeding) to carve out a place for itself among the top electric-vehicle makers.<\/p>\n

Ford has roughly doubled the industrial sector\u2019s returns in 2023, with some of that driven by optimism over its adoption of Tesla\u2019s (TSLA)<\/strong> charging network. This effectively gives Ford drivers access to some 12,000 superchargers\u2014a move that should improve satisfaction among current Ford EV owners and spur new-EV sales.<\/p>\n

Despite a 20%-plus gain in 2023, Ford trades at a very tame 4 times cash-flow estimates and offers a decent yield of nearly 5%.<\/p>\n

Zooming out a bit, it\u2019s clear investors aren\u2019t as excited about Ford as its year-to-date returns might suggest. Ford remains stuck in a range it has largely maintained since 2021.<\/p>\n

While Ford has assembled a competitive lineup of EVs, including the F-150 Lightning and Mustang Mach-E, it has recently dropped from the country\u2019s No. 2 EV maker by market share to No. 5. It\u2019s also behind the likes of Tesla from a technological standpoint\u2014for now, it\u2019s largely developing EV derivatives of vehicles based on existing internal combustion engine vehicle architectures.<\/p>\n

I\u2019ll also note that July\u2014when a 2023 dividend increase likely would have been announced\u2014came and went without any fanfare. Ford kept the payout level, which isn\u2019t necessarily cause for concern, but it won\u2019t excite income investors, either.<\/p>\n

VF Corp. (VFC)<\/strong><\/p>\n

Dividend Yield: <\/strong>6.1%<\/p>\n

Forward P\/FCF:<\/strong> 4.6<\/p>\n

VF Corp. (VFC)<\/strong> is a collection of apparel brands mostly focused on the great outdoors, including Vans, The North Face and Timberland. It also used to include Wrangler and Lee jeans until 2019, when it spun off those brands via Kontoor Brands (KTB)<\/strong>. And earlier this year, VFC said it would sell off Eastpak, JanSport and Kipling.<\/p>\n

VFC was, for a long time, a stronghold of dividend stability in the notoriously fickle fashion industry. Its payout technically dropped in 2019, but that was only a reflection of the Kontoor divestiture. However, a genuine hammer-drop came this year, when VFC announced a 41% cut to its dividend (to 30 cents per share), all but guaranteeing that, come 2024, it will officially be dropped from the ranks of the Dividend Aristocrats.<\/p>\n

The dividend cut is part of a multiyear turnaround plan meant to reverse the company\u2019s financial fortunes. That plan also includes bailing on the aforementioned brands, selling off various assets (including its international headquarters), and cost-cutting meant to save $225 million annually by the end of 2024.<\/p>\n

I mentioned earlier this year that one of its directors made a significant insider buy in Q1<\/strong>. Unfortunately for Director Juliana L. Chugg, it appears (for now) she bought too early.<\/p>\n

VFC remains dirt-cheap based on cash flow, at 4.6 times estimates, though I will point out it\u2019s still somewhat overbought based on PEG (1.4). A 6%-plus dividend could tempt some investors to stay and wait for light at the end of the tunnel.<\/p>\n

The apparel company could very well be an eventual turnaround play, but for right now, it\u2019s still showing major signs of struggle. It downgraded full-year revenue guidance from flat\/slightly up to flat\/slightly down. Successes in brands such as North Face (+12% YoY in the most recent quarter) are being offset by big declines in others such as Vans (-22%) and Dickies (-19%).<\/p>\n

UGI Corp. (UGI)<\/strong><\/p>\n

Dividend Yield: <\/strong>6.3%<\/p>\n

Forward P\/FCF:<\/strong> 4.5<\/p>\n

Utility mainstay UGI Corp. (UGI)<\/strong> is not<\/em> a dividend concern. It has paid dividends without interruption for 139 years, and it has raised them annually for 36, making it a Mid-Cap Aristocrat.<\/p>\n

UGI is pretty interesting, as far as utility stocks go. Its core utility operations include UGI, which serves 675,000 gas customers in eastern and central Pennsylvania (and a few hundred gas customers in Maryland) and 62,500 electric customers in northeastern Pennsylvania; and Mountaineer Gas Company, which distributes natural gas to roughly 214,000 customers in West Virginia.<\/p>\n

But UGI\u2019s business also includes:<\/p>\n