5 top CAPS-rated dividend stocks

You can now screen for dividend stocks using the Motley Fool’s CAPS rating system as a screening criterion. The new CAPS stock screener includes the CAPS rating along with many of the usual financial metrics, and offers preset configurations for “Value,” “Dividend,” “Small Cap,” and “High Growth.”

In today’s article on “5 Dynamic Dividend Stocks,” a Motley Fool contributor uses the “Dividend” screen to come up with five highly-rated dividend stocks, according to CAPS. Here’s my current quick take on the five dividend stocks mentioned (the stars represent Dividendinvestor.com’s star ranking system – three stars are five years of consecutive dividend increases, four stars are ten, and five stars are 20):

Aluminum Corp. of China (ACH: 20.5619 -0.43%, yld: N/A%) (0 stars) – Trading at about $14 and yielding 2.3%, the shares of this Chinese aluminum producer appear undervalued here when compared to recent historical valuation ratios, but potentially overvalued based on projected 2009 earnings. That, a yield of well under 3%, and a sporadic dividend history are more than enough to keep me away, despite its 5-star CAPS rating.

3M Company (MMM: 82.96 +1.33%, yld: 2.55%) (*****) – Yielding 4.4% and trading at about $46, the shares of this diversified materials and technology company appear about fairly valued (based on conservative earnings estimates) to undervalued here. I recently sold some puts on this Dividend Aristocrat, which may result in me being put the shares for a net cost basis of well below $40 per share. (For more, see my full take on the 3M Company.)

General Dynamics (GD: 59.59 +1.09%, yld: 2.71%) (***) – This defense contractor has seen its shares more than halved in the last year, most recently on concerns over prospects at the company’s Gulfstream aerospace unit and likely cutbacks in defense spending. Valuation measures suggest the stock – now trading at about $38 and yielding 4% – is undervalued. I recently sold some puts on GD, which may result in me being put the shares for a net cost basis of below $30 per share. (For more, see my full take on General Dynamics.)

Archer Daniels Midland (ADM: 31.72 +0.57%, yld: 1.87%) (*****) – Currently trading at about $27 and yielding 2%, the shares of this seed and grain processor appear somewhat overvalued when compared with recent historical valuation ratios, but roughly fairly valued to even undervalued based on some earnings and growth estimates. ADM is another Dividend Aristocrat, and has raised its dividend for 34 consecutive years. Its five-year dividend growth rate is almost 15%. I’m watching ADM for an opportunity in the low $20s or high teens.

Lockheed Martin (LMT: 70.60 +0.40%, yld: 3.58%) (***) – As a result of it being the world’s largest military contractor, this company’s shares have fared better than those of its rivals and now, trading at about $68 and yielding 3.4%, are down “only” a little over 40% from their highs of last year. Valuation analysis suggest the stock is somewhat undervalued here, but price action – as with other stocks in the sector – suggests it could see lower prices. I would certainly get interested if it dropped to the low $50s or below.