NEW YORK (TheStreet) -- Of the many great companies in the market, we've selected the five highest dividend yields among the undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for enterprising investor.
According to our system, defensive investors are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising investors, on the other hand, are able to do substantial research and can select companies that present a moderate, though still low, amount of risk. Each company suitable for the defensive investor is also suitable for enterprising investors.
Value investors seeking to follow Benjamin Graham's methods may also wish to review "5 Undervalued Dow Components" while proceeding with further research.
Here are our top five dividend stocks:
1. HCP (HCP)
With a dividend yield of 5.15%, HCP for now qualifies for the enterprising investor, which is a rather rare achievement for a real estate investment trust. Normally the level of debt present eliminates REITs from contention. In this case, though, the company's current assets are high enough this quarter to push it into contention for investment. For the defensive investor, the company's price-to-earnings mg ratio is too high and the current ratio is not high enough to overcome that burden. But enterprising investors following Benjamin Graham's methods should feel comfortable proceeding with further research into the company.
From a valuation standpoint, the company appears to be undervalued, having grown its EPSmg (normalized earnings) from 57 cents in 2009 to $1.54 for 2013. This demonstrated level of growth is above the market's implied estimate of 9.48% earnings growth, and the ModernGraham valuation model has returned an estimate of intrinsic value that is higher than the market price.