I have searched for profitable companies that pay rich dividends with a low payout ratio, and that are trading below book value. Those stocks would have to show also a good earnings growth prospects. I also looked for companies that are in a short-term, mid-term and long-term uptrend. Stocks in an uptrend are performing well and are in a buying mode.
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. All the data for this article were taken from Yahoo Finance and finviz.com.
The screen's formula requires all stocks to comply with all following demands:
- The forward dividend yield is greater than 3.00%.
- The payout ratio is less than 50%.
- Price-to-book value is less than 1.00.
- Trailing P/E is less than 15.
- Forward P/E is less than 16.
- Average annual earnings growth estimates for the next five years is greater than 7%.
- Stock price is above 20-day simple moving average (short-term uptrend).
- Stock price is above 50-day simple moving average (mid-term uptrend).
- Stock price is above 200-day simple moving average (long-term uptrend).
After running this screen on May 13, 2013, before the market open, I discovered the following three stocks:
Brooks Automation, Inc. (BRKS)
Brooks Automation, Inc. provides automation, vacuum, and instrumentation solutions for semiconductor manufacturing, life sciences and technology device manufacturing markets worldwide.
Brooks Automation has no debt at all and it has a very low trailing P/E of 5.79 and a forward P/E of 15.98. The price to book value is very low at 0.96, and the price-to-sales ratio is at 1.23. The average annual earnings growth estimates for the next five years is very high at 18%. The forward annual dividend yield is quite high at 3.18%, and the payout ratio is only 17%.
The BRKS stock price is 6.93% above its 20-day simple moving average, 3.40% above its 50-day simple moving average and 17.57% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On May 09, Brooks Automation reported its fiscal second-quarter 2013 financial results, which beat EPS expectations by $0.03 and beat on revenues.
Fiscal Second-Quarter of 2013 Financial and Operational Highlights
- Revenues were $116.6 Million; Order Bookings increased 31% on a sequential basis to $121.3 million;
- Semiconductor front-end product revenues increased 50% to $60 million;
- GAAP Loss Per Share was $(0.01); Adjusted Earnings Per Share excluding special charges was $0.01;
- Cash flow from operations was $11.6 million;
- Cash, Cash Equivalents and Marketable Securities as of March 31st were $145.6 million, or $2.21 per diluted share, with no Debt; and
- Generated 15 Design-in-Wins for Semiconductor and Adjacent market customers.
In the report, Steve Schwartz, President and Chief Executive Officer of Brooks said:
Our revenue exceeded our expectations in the second quarter as we experienced semiconductor front-end recovery in both our Services and Product Solutions businesses sequentially, as expected, offsetting our Life Sciences revenue decline. The integration of Crossing Automation's products into our Brooks portfolio is ahead of schedule and was a solid contributor during the quarter. We continue to have a strong market share in Life Sciences even though our revenue was less than expected in the quarter due to delays in finalizing store installations and funding uncertainty, which caused a pull-back on device and consumables demand. Heading into our third fiscal quarter, we are seeing our growth coming from our semiconductor products. This reflects a continuation of our strong market positioning.
The compelling valuation metrics, the rich dividend, the strong earnings growth prospects, the fact that the stock is trading below book value, and the fact that the stock is in an uptrend are all factors that make BRKS stock quite attractive.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide.
JPMorgan Chase has a very low trailing P/E of 8.74 and a very low forward P/E of 8.24; the PEG ratio is at 1.23. The price to free cash flow is extremely low at 5.23, and the price-to-book value is very low at 0.95. The average annual earnings growth estimates for the next five years is quite high at 7.03%, and the price-to sales ratio is at 2.06 . The forward annual dividend yield is quite high at 3.10%, and the payout ratio is only 21%.
Analysts recommend the stock; among the 33 analysts covering the stock, eight rate it as a strong buy, 20 rate it as a buy, four rate it as a hold and only one rates it as an underperform.
The JPM stock price is 1.37% above its 20-day simple moving average, 0.76% above its 50-day simple moving average and 13.25% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On April 12, JPMorgan Chase reported its first quarter 2013 financial results.
First-Quarter 2013 Highlights
The company reported record net income of $6.5 billion for the first quarter of 2013, compared with net income of $4.9 billion in the first quarter of 2012. Earnings per share were a record $1.59, compared with $1.19 in the first quarter of 2012. Revenue for the quarter was $25.8 billion, compared with $26.8 billion in the prior year. The Firm's return on tangible common equity1 for the first quarter of 2013 was 17%, compared with 15% in the prior year.
As previously announced, the Board of Directors intends to increase the second-quarter common stock dividend to $0.38 per share3 from the current $0.30 per share, returning the dividend to its highest level. The Board has also authorized the Firm to repurchase $6 billion of common equity commencing with the second quarter of this year through the end of the first quarter of 2014. During the first quarter of 2013, the Firm repurchased $2.6 billion of common equity.
The cheap valuation, the rich dividend, the analysts' recommendation, the fact that the stock is in an uptrend, and the fact that the stock is trading below book value are all factors that make JPM stock quite attractive.
Umpqua Holdings Corporation (UMPQ)
Umpqua Holdings Corporation operates as the holding company for Umpqua Bank and Umpqua Investments, Inc. that provide commercial, and retail banking and brokerage services to corporate, institutional, and individual customers in the United States.
Umpqua Holdings has a very low debt (total debt to equity is only 0.34) and it has a low trailing P/E of 14.35 and a very low forward P/E of 14.03; the PEG ratio is at 1.25. The price to free cash flow is very low at 8.32, and the price-to-book value is very low at 0.81. The average annual earnings growth estimates for the next five years is quite high at 11.50%. The forward annual dividend yield is quite high at 3.17%, and the payout ratio is only 42%.
The UMPQ stock price is 4.04% above its 20-day simple moving average, 0.35% above its 50-day simple moving average and 2.56% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On April 17, Umpqua Holdings reported its first quarter 2013 financial results, which missed EPS expectations by $0.03. The company announced first quarter 2013 net earnings available to common shareholders of $23.2 million, or $0.21 per diluted common share, compared to net earnings available to common shareholders of $27.8 million, or $0.25 per diluted common share for the fourth quarter of 2012, and $25.3 million, or $0.23 per diluted common share, for the same period in the prior year.
In the report, Ray Davis, president and CEO of Umpqua Holdings Corporation said:
It was another good quarter for Umpqua, highlighted by reductions in non-interest expense and nonperforming assets. We also remain bullish on our loan growth prospects for the rest of the year as our commercial loan pipeline has reached a record high of $1.9 billion.
All these factors -- the very low multiples, the rich dividend, the fact that the stock is trading way below book value, and the fact that the stock is in an uptrend -- make UMPQ stock quite attractive.