Run With Deere, Unhook Staples

NEW YORK ( TheStreet) -- Investors in Staples ( SPLS) and Deere ( DE) are reeling from painful earnings releases on Wednesday. For Deere, it meant margins are getting squeezed that the company attributed to higher startup costs outside North America.

Europe has not provided much positive news this earnings season. Both Deere and Staples pointed at European economic problems as reasons for disappointing investors. I can understand why CEOs use Europe as the whipping boy, but it's not the only market in the world and, in fact, doesn't explain the rest of the performances for either.

To Deere's credit, the company did beat on revenue, and it's hard to argue the bottom-line results were that bad. Deere made $1.98 per share in the fiscal 2012 third quarter, up an impressive 29 cents over the same period last year.

Deere reported $9.59 billion in sales, also impressive with a 15% rise from last year. The main catalyst for the gap down in price is the squeezing of margins and lower guidance for growth. Both reasons appear to overstate any issues by the green equipment giant.

In this current economy, companies that can guide with double-digit growth expectations deserve a second look. Actually, your portfolio deserves a second look at Deere.

Deere expects to grow 13%, and while investors may have priced in a higher trajectory, maybe it's time for a reality check by those liquidating shares.

Deere's forward dividend is $1.84 after the recent adjustment. With a price of $75 a share, which means Deere is paying a yield of about 2.4%. But that's not all folks, if you order today and buy at $75 you also get a forward price-to-earnings multiple under 10 at no added cost.

Ok, that sounds a bit over-the-top with the sales pitch, but the payout ratio (the amount of profits paid in dividends) is less than 25%. That means that more dividend increases in the future are as likely with Deere as most anyone else. Plus the ultra-low earnings multiple means you are paying nothing for the 13% growth rate.

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