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 that pay very rich dividends with a low payout ratio, and that are trading below book value.
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 4.20%.
- The payout ratio is less than 50%.
- The Price to Book Value is less than 1.00.
- Trailing P/E is less than 10.
- Forward P/E is less than 12.
After running this screen on July 20, 2013, I discovered the following three stocks:
Compañía de Minas Buenaventura (NYSE:BVN)
Compañía de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining, and processing of gold and silver in Peru. Compañía de Minas Buenaventura S.A.A. was founded in 1953 and is headquartered in Lima, Peru.
Compañía de Minas Buenaventura has a very low debt (total debt to equity is only 0.05), and it has an extremely low trailing P/E of 5.97 and forward P/E of 6.81. The PEG ratio is very low at 0.90, and the average annual earnings growth estimates for the next five years is at 6.6%. The price-to-book-value ratio is very low at 0.90. The forward annual dividend yield is very high at 4.28%, and the payout ratio is only 26%. The annual rate of dividend growth over the past five years was very high at 16.89%.
BVN will report its latest quarterly financial results on July 29. BVN is expected to post a profit of $0.37 a share, a 38% decline from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.
The very low multiples, the very rich dividend, the fact that the company consistently has raised dividend payments, and the fact that the stock is trading below book value, are all factors that make BVN stock quite attractive.
FLY Leasing Limited (NYSE:FLY)
Fly Leasing Limited leases commercial jet aircraft worldwide. Fly Leasing Limited was founded in 2007 and is headquartered in Dun Laoghaire, Ireland.
Fly Leasing Limited has a very low trailing P/E of 6.78 and a very low forward P/E of 7.21. The price-to-sales ratio is very low at 0.93, and the price-to-book-value ratio is also very low at 0.73. The forward annual dividend yield is very high at 6.01%, and the payout ratio is only 41%.
FLY will report its latest quarterly financial results at the beginning of August. FLY is expected to post a profit of $0.38 a share, a 61% decline from the company's actual earnings for the same quarter a year ago.
All these factors -- The very low multiples, the very rich dividend, and the fact that the stock is trading way below book value - make FLY stock quite attractive.
Tronox Limited (NYSE:TROX)
Tronox Limited produces and markets titanium ore and titanium dioxide in the Americas, Europe, and the Asia-Pacific.
Tronox Limited has an extremely low trailing P/E of 2.36 and a very low forward P/E of 11.21. The current ratio is very high at 7.10, and the price-to-book-value ratio is very low at 0.96.The forward annual dividend yield is very high at 4.75%, and the payout ratio is only 7%.
TROX will report its latest quarterly financial results on August 06. TROX is expected to post a loss of $0.11 a share.
Recently, two company officers bought significant quantity of TROX shares. On June 04, Van Niekerk Hendrik purchased 1,000 shares at $20.95 valued $20,950, and on June 10, Casey Thomas, Chairman and CEO of the company, purchased 20,000 shares at $21.24 valued $424,800.
All these factors -- The very low multiples, the very rich dividend, the fact that the stock is trading below book value, and the fact that insiders are buying the stock - make TROX stock quite attractive.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.