5 Undervalued Companies With High Dividends: Mattel, Chevron, More

NEW YORK (TheStreet) -- There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected the five highest dividend yields among undervalued companies we review.

Each company has been determined to be suitable for defensive investors -- investors who 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.

Now let's turn to the companies.

1. Mattel (MAT)

With a dividend yield of 3.92%, Mattel is suitable for either the defensive investor or the enterprising investor. For the defensive investor, the only concern is the high PB ratio, while the company passes all of the requirements of the enterprising investor. As a result, value investors seeking to follow Benjamin Graham's methods should feel comfortable proceeding with further research into the company, including comparing the company to Hasbro (HAS).  

From the valuation side of things, Mattel appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.35 in 2009 to $2.25 for 2013. This demonstrated level of growth is greater than the market's implied estimate of 4.37% and leads our valuation model to return an estimate of intrinsic value that is well above the market price.


MAT Chart

MAT data by YCharts

2. Intel (INTC)

Intel has a dividend yield of 3.46% and fares extremely well in our requirements, passing every test for both defensive and enterprising investors. This is a company that appears to present low risk of financial strife and may present relative safety of principal. As a result, value investors following Benjamin Graham's methods should feel very comfortable proceeding with further research into the opportunity.  

An example of further research would be to look into some competitors, reviewing Hewlett-Packard (HPQ) and Texas Instruments (TXN). From a valuation standpoint, the company looks very strong, having grown its EPSmg (normalized earnings) from 95 cents in 2009 to $2.00 for 2013.

This level of growth easily supports the market's implied estimate for growth of 2.25%, and our valuation model returns an intrinsic value that exceeds the current market price. Therefore, the company appears to be undervalued at the current time.


INTC Chart

INTC data by YCharts

3. Chevron (CVX)

With a dividend yield of 3.46%, Chevron is suitable for either defensive or enterprising investors. The defensive investor's only issue with the company is the low current ratio, and the enterprising investor's only issue is the high level of debt relative to the company's current assets. Value investors following Benjamin Graham's methods should feel comfortable proceeding with further research, including a review of Exxon-Mobil (XOM) and ConocoPhillips (COP).  

From the valuation side of things, the company has grown its EPSmg (normalized earnings) from $8.09 in 2009 to $11.58 for 2013. This is a solid level of growth that outpaces the market's implied estimate of earnings growth of 1.10%, and our valuation model accordingly returns an estimate of intrinsic value that surpasses the market price by more than our margin of safety.

Therefore, the company appears to be undervalued presently.


CVX Chart

CVX data by YCharts

4. CA Technologies (CA)

With a dividend yield of 3.44%, CA Technologies looks very good for value investors. The company passes the requirements of the defensive investor, failing only the current ratio requirement, and is also suitable for enterprising investors.  All intelligent investors should feel comfortable proceeding with further research to determine if CA Technologies would be right for their individual portfolios, and that research may include reviewing other with a particular emphasis on a comparison with IBM (IBM) and Oracle (ORCL).  

From a valuation perspective, CA Technologies also looks good, having grown its EPSmg (normalized earnings) from 76 cents in 2009 to an estimated $2.02 for 2013.  This is a solid level of growth that leads our valuation model to calculate an intrinsic value that surpasses the market's current price. 

The company appears to be undervalued at the present time. 


CA Chart

CA data by YCharts

5. Wells Fargo (WFC)

Wells Fargo has an attractive dividend yield of 2.86%. It is a company that is intriguing to all value investors, as it passes all of the requirements of both the defensive and enterprising investor. As a result, value investors should feel comfortable proceeding with further research into the company and comparing it to other opportunities like US Bancorp (USB) and KeyCorp (KEY).  

As for valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.48 for 2014. This solid level of demonstrated growth more than supports the market's implied estimate of 2.79% earnings growth and leads our valuation model to return an estimate of intrinsic value that is well above the market price.


WFC Chart

WFC data by YCharts

What do you think? Are these companies a good value for Defensive Investors? Is there a company you like better? Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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