There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected ten of the best dividend paying stocks for the Enterprising dividend stock investor.  These companies have the highest dividend yields among the undervalued companies reviewed by ModernGraham which are suitable for Enterprising Investor according to the ModernGraham approach.

Defensive Investors are defined as 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.

The companies selected for this list may not pay what some consider to be a huge dividend, but they have demonstrated strong financial positions through passing the requirements of the Enterprising Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these defensive dividend stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

Be sure to check out all of the companies reviewed by ModernGraham!

Starwood Property Trust, Inc. (STWD)

Starwood Property Trust, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.17 in 2012 to an estimated $1.98 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.4% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Starwood Property Trust, Inc. revealed the company was trading below its Graham Number of $27.64. The company pays a dividend of $1.92 per share, for a yield of 8.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.3, which was below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry.  (See the full valuation)

STWD charts August 2016

Sabra Health Care REIT Inc (SBRA)

Sabra Health Care REIT Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.29 in 2012 to an estimated $0.88 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.6% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Sabra Health Care REIT Inc revealed the company was trading above its Graham Number of $17.74. The company pays a dividend of $1.66 per share, for a yield of 6.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.71, which was below the industry average of 34.03, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-15.03.  (See the full valuation)

Chesapeake Lodging Trust (CHSP)

Chesapeake Lodging Trust is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.29 in 2012 to an estimated $0.98 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.4% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Chesapeake Lodging Trust revealed the company was trading above its Graham Number of $22.35. The company pays a dividend of $1.6 per share, for a yield of 6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.29, which was below the industry average of 31.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.24.  (See the full valuation)

Seagate Technology PLC (STX)

Seagate Technology PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.39 in 2012 to an estimated $3.74 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

STX charts July 2016

Western Refining, Inc. (WNR)

Western Refining, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, and the poor dividend history.

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