Cheap High-Yield Stocks: LLY, UAN, INTC, GRMN

November 20, 2012, 09:16 am ET, BY Patrick- Contributor, Stock Traders Daily| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

While investors and traders are beginning to feel increasingly confident that Congress will avert disaster and devise a compromise and plan to avoid going over the so-called fiscal cliff, there is still much uncertainty in regards to what the plan will ultimately include. PROFIT FROM THESE STOCKS TODAY!

What is almost a certainly, though, is that capital gains and dividend taxes will be going up. This certainly played a role in the stock market’s sell-off immediately following the election results. At the moment, dividends are taxed at 15%, but that rate may be pushed to the ordinary income rate of 39.6%.

The hike in taxes is a notable headwind for high-yield dividend stocks, but, my sense is that income-generating stocks will remain in favor going forward. My thesis is simply based on the idea that the global conditions for growth stocks will remain very challenging, investors will continue to have a defensive posture, and that bonds and treasuries will continue to offer yields below inflation.

With that in mind, here are a few high-quality stocks currently offering attractive yields that also have cheap valuations:

Pharmaceutical giant Eli Lilly & Co. (NYSE:LLY) is coming off a disappointing third quarter report on Oct. 24 in which it missed on both the top and bottom lines and saw its revenue fall by 12% year/year. The miss has sent the stock tumbling lower after a three-month rally, but, the decline in stock price has also created a healthy 4.3% dividend yield.

This, combined with its low P/E of ~13x, should lend some support for shares. Furthermore, according to our real-time trading reports, LLY just touched its longer-term support levels at ~$45.60 and has subsequently rebounded higher off that area. Details can be found here: Trading Report.

CVR Partners LP (NYSE:UAN) is one of the more intriguing high-yield plays that I am aware of.  The company - a recent spin-off and IPO from April 2011 - owns and operates a fertilizer business, selling urea ammonium nitrate and nitrogen fertilizer. This makes the company an agriculture play, an industry that is poised for solid growth ahead due to rising food prices and food shortages. In order to meet this expected increase in demand, UAN has expanded its production capacity by expanding its plant output by ~400K tons. So, not only does UAN have compelling growth prospects (analysts projecting EPS growth of 15% in FY13), but it also pays a hefty yield of 8.3%.

From a technical perspective, its recent slide did take it under its 200-day moving average and its recent recovery now has the stock attempting to re-take its 200 day. For a more detailed analysis, click here for our real-time trading report.

There is also a pair of interesting, but beat-down, tech names that popped up on my screen. The woes facing Intel Corporation (NASDAQ:INTC), most notably including a global slowdown in PC sales & high chip inventories, are well-known. The stock has been punished as a result of its poor growth prospects, but INTC is now looking more like a high-yield utility stock than a tech stock with a yield of 4.5%. Additionally, according to our real-time trading reports, further downside should be limited as its long-term support lies just beneath current trading levels, at $19.75. Details can be found here: Trading Report.

Finally, Garmin Ltd. (NASDAQ:GRMN) - the GPS product provider - pays a healthy dividend yielding 4.8% while sporting a cheap P/E of less than 13x. The stock has also recently tested and bounced off a clear support level at $36 (click here to access our trading reports).

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