Looking to add some dividend income to your portfolio during the earnings season?
Keeping that in mind, we began by screening for stocks reporting earnings next week with a dividend yield of at least 3%. This yield is above the current average yield of the S&P 500 of 2.51%.
Then we screened that universe for those that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.
It is based off of a stock's EPS and book value per share (BVPS).
Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)
The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.
1. Community Trust Bancorp Inc. (NASDAQ:CTBI): Operates as the holding company for Community Trust Bank, Inc. Market cap at $512.32M, most recent closing price at $32.82. Diluted TTM earnings per share at 2.85, and a MRQ book value per share value at 25.57, implies a Graham Number fair value = sqrt(22.5*2.85*25.57) = $40.49. Based on the stock's price at $33.41, this implies a potential upside of 21.2% from current levels. Dividend yield at 3.84%. The company is expected to report earnings on January 14th , 2013.
2. Fulton Financial Corporation (NASDAQ:FULT): Operates as a multi-bank holding company that offers retail and commercial banking products and services in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia. Market cap at $2.07B, most recent closing price at $10.39. Diluted TTM earnings per share at 0.78, and a MRQ book value per share value at 10.36, implies a Graham Number fair value = sqrt(22.5*0.78*10.36) = $13.48. Based on the stock's price at $10.47, this implies a potential upside of 28.79% from current levels. Dividend yield at 3.1%. The company is expected to report earnings on January 15th, 2013
3. People's United Financial Inc. (NASDAQ:PBCT): Operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. Market cap at $4.37B, most recent closing price at $12.56. Diluted TTM earnings per share at 0.67, and a MRQ book value per share value at 15.2, implies a Graham Number fair value = sqrt(22.5*0.67*15.2) = $15.14. Based on the stock's price at $12.6, this implies a potential upside of 20.14% from current levels. Dividend yield at 5.1%. The company is expected to report earnings on January 17th, 2013.
*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.