There are a number of great companies in the market today. I’ve selected the highest dividend yields among the undervalued companies for defensive dividend stock investors reviewed by ModernGraham. Each company has been determined to be suitable for the Defensive Investor according to the ModernGraham approach.

Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

The companies selected for this list may not pay what some consider to be a huge dividend, but they have demonstrated strong financial positions through passing the rigorous requirements of the Defensive Investor and show potential for capital growth based on their current price in relation to intrinsic value.  As such, these defensive dividend stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.

Be sure to check out the history of this screen!

10 Undervalued Companies for the Defensive Dividend Stock Investor

Gap Inc. (GPS)

Gap Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only initially concerned by the low current ratio while the Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.59 in 2012 to an estimated $2.44 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.66% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Western Digital Corp (WDC)

Western Digital Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the short dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.74 in 2012 to an estimated $5.98 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 1.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.  (See the full valuation)

Welltower Inc (HCN)

Welltower Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.12 in 2012 to an estimated $2.53 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.95% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

WestRock Co (WRK)

WestRock Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor’s only initial concern is the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.97 in 2012 to an estimated $3.28 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.64% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Invesco Ltd. (IVZ)

Invesco Ltd qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only initially concerned by the low current ratio while the Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company passes the more stringent Defensive Investor requirements. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.22 in 2011 to an estimated $2.12 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.52% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Macerich Co (MAC)

Macerich Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor’s only concern is the low current ratio. The Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company qualifies for the more conservative Defensive Investor. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.09 in 2011 to an estimated $4.27 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.32% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

QUALCOMM, Inc. (QCOM)

Qualcomm Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s financial strength. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.49 in 2012 to an estimated $3.80 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.49% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Principal Financial Group Inc (PFG)

Principal Financial Group Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.13 in 2012 to an estimated $3.73 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.3% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Cummins Inc. (CMI)

Cummins Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $5.78 in 2011 to an estimated $8.71 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.77% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)

Dow Chemical Co (DOW)

Dow Chemical Co qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only concerned by the low current ratio while the Enterprising Investor is only initially concerned by the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.49 in 2011 to an estimated $3.01 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.65% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.  (See the full valuation)