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AFLAC Incorporated (AFL), Apple Inc. (AAPL), HollyFrontier Corp (HFC): Five Hits From a Stock Screen

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The latest issue of the T. Rowe Price Report includes an interview with David Giroux, manager of Price’s Capital Appreciation Fund, who wraps up the article with some advice: “Focus on companies with 2% to 3% dividend yields that have high-quality business models and trade for no more than 15 times earnings.”

That sounds like the makings of a stock screen. The Motley Fool’s CAPS Screener found 136 stocks that meet the dividend and P/E ratio criteria. Unfortunately, there’s no “high-quality business model” parameter, so I thinned the results to stocks with a four- or five-star rating from our CAPS community. That cut the field to 79 names from the seven sectors shown below.

The table below lists five of the stocks — one from each of the five sectors with the most hits.

Company

Current Dividend Yield

P/E (TTM)

CAPS Rating (out of 5)

Sector

AFLAC Incorporated (NYSE:AFL)

2.5%

8.7

*****

Financial

HollyFrontier Corp (NYSE:HFC)

2.5%

5.5

*****

Basic materials

CSX Corporation (NYSE:CSX)

2.4%

14.1

*****

Services

Apple Inc. (NASDAQ:AAPL)

2.7%

10.6

****

Consumer goods

Illinois Tool Works Inc. (NYSE:ITW)

2.2%

12

*****

Industrial goods

Source: Motley Fool CAPS Screener. TTM = trailing 12 months.

HollyFrontier Corp (NYSE:HFC) is an oil refiner. The trailing P/E looks like deep-value territory, but analyst estimates going forward bump the ratio up to nine — still not expensive. With a payout ratio of only 37%, Holly has some cushion to maintain and grow the dividend. The company has increased the dividend five times since 2011 and authorized two $350 million share buybacks last year.

Apple Inc. (NASDAQ:AAPL) wouldn’t have made this list a year ago. A new dividend started last year, and a recent dividend hike and a stock price retreat over the past several months have put Apple Inc. (NASDAQ:AAPL) squarely into the yield and valuation range recommended by Giroux. In addition to the dividend hike, Apple Inc. (NASDAQ:AAPL) increased its share buyback authorization from $10 billion to $60 billion in April. As for a high-quality business model, I suspect a high percentage of the folks reading this — perhaps even both of you — are doing so on an Apple Inc. (NASDAQ:AAPL) device.

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