Cisco Systems, Inc. (CSCO), Family Dollar Stores, Inc. (FDO): These 3 Stocks Are Irrationally Undervalued

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These stocks trade for multiples of earnings that have a lot of room for expansion. Cisco Systems, Inc. (NASDAQ:CSCO) trades for just 12 times its fiscal 2012 earnings per share, meaning investors are offered a tantalizing combination of a 8.3% earnings yield and a 3.2% dividend yield. Coach trades for only 14 times trailing earnings and offers shareholders a solid dividend yield of 2.5% at recent prices.

In 2012 Coach increased its dividend by 33%.  Coach has an amazing three-year dividend growth rate of 58% compounded annually.  Not to be outdone, Cisco recently announced that it will increase its quarterly dividend by 21% to $0.68 per share annualized. As a result, the stock now yields 3.2%, a compelling dividend yield that far exceeds the approximately 2% yield on the S&P 500 Index. Although Cisco Systems, Inc. (NASDAQ:CSCO) is a relatively new dividend-paying stock, having only recently instituted its dividend program in 2011, the company has almost tripled its shareholder payout since then.

Family Dollar has the longest dividend track record of the three. In January this year, the company increased its dividend by more than 23%. This marked the 37^th consecutive annual dividend increase for Family Dollar Stores, Inc. (NYSE:FDO).

Clearly, these companies made returning cash to shareholders a priority over the past few years. It’s certainly an encouraging sign that each company is so intent on rewarding shareholders. Each of these stocks offers investors the tantalizing combination of attractive valuations and hefty dividend yields. New investors have the opportunity to cash in on both sides of the equity investing coin: strong capital gains potential in addition to high dividend returns.

The article These 3 Stocks Are Irrationally Undervalued originally appeared on Fool.com and is written by Robert Ciura.

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