3 Low Beta Stocks That Have Reasonable Growth Prospects

It has been a wild week in the market, and it is only Wednesday. It looks like the market may sell off again today, so it is time to get a shopping list out again and go hunting for stable, high dividend stocks that have been punished in this recent downdraft. Here are three stocks with 5% or better yields that have low valuations and reasonable growth prospects.

Lorillard, Inc. (LO) - Lorillard, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States. The company offers 43 different product offerings under the Newport, Kent, True, Maverick, and Old Gold brand names.

Overview

Lorillard has pulled back 10% in the last two couple of weeks and looks like a good value here, given its growing earnings and large dividend.

5 reasons to like LO at $10:

It has easily beat earnings estimates the last four quarters and consensus for 2011, and 2012 EPS has risen over the last ninety days.

LO has a robust dividend yield of 5.2% yield and has grown its dividend payments approximately 35% over the last three years

Lorillard is selling for less than 12 times 2012’s consensus earnings and has a five year projected PEG of 1.4, which is very reasonable given its large dividend.

The company continues to grow market share in the United States, has a low beta of .47 and has a strong share buyback program (it retired 6% of shares in 2010)

LO is under analysts’ price targets. S&P has a price target of $113 on LO and UBS has a call for $120 on the shares.

Merck & Co. (MRK) - Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products.

Overview

For being in the defensive sector of Pharma, Merck has sold off in line with the market and has dropped a little less than 20% in the last couple of weeks. It looks like a good value here.

5 reasons MRK is compelling at $31.

It is selling at the very bottom of its five year valuation range based on P/B and P/S.

Merck has a juicy yield of 5.1% which should provide a nice floor under the stock

MRK has met or beat earnings estimates each of the last four quarters and is selling at just over 8 times this year’s expected earnings. It is one of the few stocks that will have a P/E of 8 and a dividend yield of over 5%.

Merck has an AA rated balance sheet, a low beta of .71 and is generating more cost savings from its merger with Schering Plough than expected.

It is significantly under some analysts’ price targets. S&P has a price target of $42 and Credit Suisse is at $44 on MRK.

SCANA Corp. (SCG) - SCANA Corporation and its subsidiaries engage in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. It owns nuclear, coal, hydro, oil and gas, and biomass generating facilities.

Overview

Scana has lost about 15% of its value in the last few weeks. Its valuation looks compelling here.

5 reasons to find value in SCG at $37:

SCANA yields a generous 5.5% and it has raised its dividend by around 3% a year over the last half decade

It is selling near the bottom of its five year valuation range based on P/E and P/B.

SCG is selling at around 12 times this year’s expected earnings and 1 times trailing revenues. A key insider bought shares at $40 over the last six months.

SCG is a low beta stock (.58) that has stable cash flow and earnings given the regulated nature of most of its business.

S&P has a price target on SCANA of $43 and the consensus analyst price target on SCG is $43.50.

Disclosure: I am long MRK and may also pick up LO in the next 72 hours.