Marvell Technology Group Ltd. (MRVL), Quest Diagnostics Inc (DGX) & 5 Dividend Stocks Boasting High Free Cash Flow Yields

Its total revenue is projected to be down 1.5% to 2% in this quarter from the prior-year quarter; excluding political revenue it is projected to be up 3% to 3.5%. The company’s catalysts in the future include retransmission, mobile television, multicasting, 2014 political ads and Olympics. In terms of valuation, Belo Corp (NYSE:BLC) is priced at 14.3x and 11.0x its 2013 and 2014 EPS, respectively. However, the stock is trading at a price-to-book of 3.8, which exceeds its five-year historical ratio of 3.4. Belo Corp (NYSE:BLC) pays a dividend yield of 2.9% on a payout ratio of 30% of last year’s FCF.

Marvell Technology Group Ltd. (NASDAQ:MRVL)

Marvell Technology Group Ltd. (NASDAQ:MRVL) is a chipmaker with a FCF yield of 9.1%. The company generated $562 million or $1.00 per share in FCF last fiscal year. Marvell Technology Group Ltd. (NASDAQ:MRVL) is one of the largest holdings in David Einhorn’s Greenlight Capital hedge fund. Due to Marvell Technology Group Ltd. (NASDAQ:MRVL)’s stock buyback activity, Greenlight Capital had to sell 1.7 million Marvell Technology Group Ltd. (NASDAQ:MRVL) shares in early April so as to reduce its beneficial ownership to 9.99%, below the 10% threshold that would make the hedge fund subject to Section 16 of the Securities Exchange Act of 1934. Given that Einhorn also holds a derivative arrangement through total return swaps on Marvell Technology Group Ltd. (NASDAQ:MRVL)shares, his economic interest in the stock equals 12.4%.

Einhorn boosted his Marvell Technology Group Ltd. (NASDAQ:MRVL) stake when the company’s shares plunged after a ruling by a U.S. judge that imposed a $1.1 billion fine on Marvell due to its infringement of two patents held by Carnegie Mellon University. Einhorn believed the fine would be “substantially reduced or eliminated.” Aside from this, Marvell still has a strong growth outlook, as its product pipeline is increasingly focused on the storage and smartphone markets. The company offers a yield of 2.2% on a payout ratio of 24% of last year’s FCF.

Quest Diagnostics Inc (NYSE:DGX)

Quest Diagnostics Inc (NYSE:DGX), a world’s leading provider of diagnostic testing, information and services, has a FCF yield of 9.4%. The company generated $897 million or $5.60 per share in FCF last fiscal year. Quest Diagnostics Inc (NYSE:DGX) has embarked on a robust dividend growth since 2011, increasing its regular dividend cumulatively by 200%. The outlook for continued dividend growth is strong, as the company boasts a low payout ratio of only 21%. Its current yield is 2.0%. The company’s market has been growing and is expected to continue expanding at a 4% rate.

However, Quest Diagnostics Inc (NYSE:DGX) reported first-quarter revenues and EPS well below Wall Street estimates, as its net sales dropped 6.3% and adjusted EPS from continuing operations plunged 15.2%. DGX is focused on restoring growth, targeting a low-single-digit revenue growth through 2015. Still, its revenues will be mainly flat this year, approximating revenue growth in the previous year. The company projects its adjusted EPS between $4.35 and $4.55, compared to $4.36 in 2012. It is committed to achieving a sustainable double-digit EPS growth by 2014, driven by improved operating earnings and stock buybacks. It will also aim to “maintain meaningful dividend which can grow over time with earnings.”

Owens & Minor Inc. (NYSE:OMI)

Owens & Minor Inc. (NYSE:OMI), a provider of healthcare products and third-party logistics and supply-chain management services, has a FCF yield of 7.2%. Its total FCF last year was $153 million or $2.43 per share. Owens & Minor Inc. (NYSE:OMI) has paid dividends since 1926, and has increased them for the past 15 years in a row. Currently, it has a dividend yield of 2.9%, payout ratio of 40% of last year’s FCF, and five-year annualized dividend growth of 13.7%.

The company recently reported a 2.6% increase in first-quarter revenues, driven by the sales contribution from Movianto, a leading European healthcare third-party logistics business which Owens & Minor Inc. (NYSE:OMI) acquired last year. Still, adjusted EPS dropped 4.3% from the prior-year quarter. However, the company expects a turnaround in sales and profitability this year, expecting a 2%-to-4% revenue growth and adjusted EPS in the range of $1.90 to $2.00, up from $1.85 last year. Movianto will lead the company’s near-term sales growth, while innovation and acquisitions will be Owens & Minor Inc. (NYSE:OMI)’s future growth engines.

Final thoughts

Research suggests that stocks boasting high FCF yields have historically outperformed the stocks with low FCF yields, as well as the broader market. Moreover, stocks combining the highest FCF yields and the highest dividend yields have produced the highest total returns when compared to returns based either on dividend yield or FCF yield alone, according to research by asset manager Manning and Napier; learn the secrets of one under-the-radar method investors are using to beat the market.

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