Seeking Alpha
, Portfolio123 (1,214 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

Research has shown that stocks with low price-to-book-value have less downside risk than the average stock and tend to outperform the overall market average as well.

I have searched for very profitable companies with very low price-to-book-value that pay rich dividends. Those stocks would have to show a very low price to free cash flow and a very low P/E.

I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks comply with all the following demands:

  1. Dividend yield is greater than 4.0%.
  2. The payout ratio is less than 60%.
  3. Price to free cash flow is less than 10, (many investors prefer using free cash flow instead of net income to measure a company's financial performance, because free cash flow is more difficult to manipulate. Free cash flow is the operating cash flow minus capital expenditure).
  4. Price-to-book value is less or equal 0.80.
  5. Trailing P/E is less than 10.

After running this screen on January 31, 2013, before the market open, I discovered the following three stocks:

(click to enlarge)

(click to enlarge)

(click to enlarge)

Salisbury Bancorp Inc. (SAL)

Salisbury Bancorp, Inc. operates as the holding company for Salisbury Bank and Trust Company that provides commercial banking, consumer financing, retail banking, and trust and wealth advisory services.

Salisbury Bancorp has a very low debt (total debt to equity is only 0.04), and it has a very low trailing P/E of 9.41. The price to free cash flow for the trailing 12 months is very low at 9.69, and the price to book value is very low at 0.60. The forward annual dividend yield is very high at 4.46% and the payout ratio is only 41.9%.

The stock price is 0.62% above its 20-day simple moving average, 0.36% above its 50-day simple moving average and 1.12% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

On January 25, Salisbury Bancorp reported results for its fourth quarter and full year ended December 31, 2012.

Selected fiscal year 2012 highlights

Net income available to common shareholders was $3,859,000, or $2.28 per common share, for 2012, compared with $3,588,000, or $2.12 per common share, for 2011. Earnings per common share increased $0.16, or 7.5%, to $2.28.

Selected fourth quarter 2012 highlights

Net income available to common shareholders was $531,000, or $0.31 per common share, for its fourth quarter ended December 31, 2012 (fourth quarter 2012), compared with $1,094,000, or $0.65 per common share, for the third quarter ended September 30, 2012 (third quarter 2012), and $1,184,000, or $0.70 per common share, for the fourth quarter ended December 31, 2011 (fourth quarter 2011). Fourth quarter 2012 results included a $450,000 non-recurring expense to the FHLBB that will be recovered in 2013 through reduced interest expense. Earnings per common share decreased $0.34, or 52.3%, to $0.31 versus third quarter 2012, and $0.39, or 55.7%, versus fourth quarter 2011.

Fourth quarter 2012 dividend

The Board of Directors of Salisbury Bancorp, Inc. declared a $0.28 per common share quarterly cash dividend at their January 25, 2013 meeting. The dividend will be paid on February 22, 2013 to shareholders of record as of February 8, 2013.

The compelling valuation metrics, the rich dividend and the fact that the stock is in an uptrend are all factors that make SAL stock quite attractive.

(click to enlarge)

Chart: finviz.com

Roundy's, Inc. (RNDY)

Roundy's, Inc. engages in the operation of retail grocery stores under the Pick'n Save, Rainbow, Copps, Metro Market, and Mariano's Fresh Market retail banners.

Roundy's has a very low trailing P/E of 6.15 and its forward P/E is even lower at 4.80. The PEG ratio is very low at 0.62. The price to free cash flow for the trailing 12 months is very low at 6.87, and the price-to-book value is very low at 0.80. The forward annual dividend yield is very high at 9.18% and the payout ratio is at 56.5%.

RNDY will report its latest quarterly financial results on February 27. RNDY is expected to post a profit of $0.18 a share. The reported results will probably affect the stock price in the short term.

The compelling valuation metrics and the very rich dividend are all factors that make RNDY stock quite attractive.

(click to enlarge)

Chart: finviz.com

Transportadora de Gas Del Sur S.A. (TGS)

Transportadora de Gas del Sur S.A. engages in the transportation of natural gas primarily in Latin America. Transportadora de Gas del Sur S.A. was founded in 1992 and is based in Buenos Aires, Argentina. Transportadora de Gas del Sur S.A. is a subsidiary of Compañía de Inversiones de Energía S.A.

Transportadora de Gas has a very low trailing P/E of 6.53 and its forward P/E is at 8.17. The price to free cash flow for the trailing 12 months is very low at 4.01, and the price-to-book value is very low at 0.74. The forward annual dividend yield is very high at 8.44% and the payout ratio is at 55.2%.

The stock price is 5.21% above its 20-day simple moving average, 23.80% above its 50-day simple moving average and 17.86% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.

Transportadora de Gas will report its latest quarterly financial results on February 10. The reported results will probably affect the stock price in the short term.

The compelling valuation metrics, the rich dividend and the fact that the stock is in an uptrend are all factors that make TGS stock quite attractive.

(click to enlarge)

Chart: finviz.com

Source: 3 High-Yielding Dividend Stocks With A Very Low Price-To-Book Value