Seeking Alpha
What is your profession? ×
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)

Do you consider yourself a value investor? If so, we ran a screen looking for potentially undervalued dividend stocks you may be interested in.

We began by screening for dividend stocks paying dividend yields below 3% with sustainable payout ratios below 50%. We then screened for those that have outperformed the market over the last quarter, with quarterly performance above 10%.

Finally, 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 on 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.

A Closer Look

We looked at Molson Coors Brewing Company (NYSE:TAP) in more detail. The stock trades around $45 versus its 52-week range of $37.96-$46.35, up 6% in the past year. It trades with a P/E multiple of 11 times, and pays a dividend of 3%. The company's close competitor Anheuser-Busch InBev NV (NYSE:BUD) trades with a multiple of 19 times. The stock is up 50% in the past year and trades around $93.81, close to its 52-week high of $94.49. The company pays a dividend of 2.9%, and has a 5-year dividend growth of 15%.

Molson reported earnings this morning of $0.69 versus consensus of $0.66. Revenues reported were $1.03 billion, lower than the consensus of $1.07 billion. Main reasons for the miss being higher taxes and marketing costs.

More importantly, the company reported free cash flow of $865 million, and cash on its balance sheet of $624 million.

Is this earnings miss a one-time event?

The List

For an interactive version of this chart, click on the image below.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

1. Archer Daniels Midland Company (NYSE:ADM): Procures, transports, stores, processes and merchandises agricultural commodities and products in the United States and internationally.

  • Market cap at $20.52B, most recent closing price at $31.16.
  • Diluted TTM earnings per share at 2.08, and a MRQ book value per share value at 28.94, implies a Graham Number fair value = sqrt(22.5*2.08*28.94) = $36.80. Based on the stock's price at $30.22, this implies a potential upside of 21.78% from current levels.
  • Dividend yield at 2.25%, payout ratio at 34%. Performance over the last quarter at 24%.

2. International Bancshares Corporation (NASDAQ:IBOC): Provides commercial and retail banking services in south, central and southeast Texas, and Oklahoma.

  • Market cap at $1.34B, most recent closing price at $19.99.
  • Diluted TTM earnings per share at 1.47, and a MRQ book value per share value at 21.31, implies a Graham Number fair value = sqrt(22.5*1.47*21.31) = $26.55. Based on the stock's price at $19.81, this implies a potential upside of 34.02% from current levels.
  • Dividend yield at 2.1%, payout ratio at 39%. Performance over the last quarter at 11%.

3. Molson Coors Brewing Company: Distributes beer brands.

  • Market cap at $8.08B, most recent closing price at $44.62.
  • Diluted TTM earnings per share at 3.07, and a MRQ book value per share value at 45.39, implies a Graham Number fair value = sqrt(22.5*3.07*45.39) = $55.99. Based on the stock's price at $44.41, this implies a potential upside of 26.08% from current levels.
  • Dividend yield at 2.9%, payout ratio at 36%. Performance over the last quarter at 10%.

4. The Travelers Companies, Inc. (NYSE:TRV): Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals primarily in the United States.

  • Market cap at $30.19B, most recent closing price at $79.99.
  • Diluted TTM earnings per share at 6.3, and a MRQ book value per share value at 67.32, implies a Graham Number fair value = sqrt(22.5*6.3*67.32) = $97.69. Based on the stock's price at $78.86, this implies a potential upside of 23.87% from current levels.
  • Dividend yield at 2.3%, payout ratio at 38%. Performance over the last quarter at 15%.

*EPS and BVPS 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.