4 Good-Yielding Stocks With A Very Low PEG Ratio

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 |  Includes: BNS, BRKS, CMTL, ROYT
by: Arie Goren

The PEG Ratio - price/earnings to growth ratio, is a widely used indicator of a stock's potential value. It is favored by many investors over the P/E ratio because it also accounts for growth. A lower PEG means that the stock is more undervalued.

I searched for profitable companies with strong earnings growth prospects that pay rich dividends. Those stocks would have to show a low PEG ratio and a low debt.

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:

  1. The forward dividend yield is greater than 3.2%.
  2. The PEG ratio is less or equal 0.90.
  3. Average annual earnings growth estimates for the next five years is greater or equal 12%.
  4. Debt to equity is less than 0.50.

After running this screen on August 04, 2013, I discovered the following four stocks:

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The Bank of Nova Scotia (NYSE:BNS)

The Bank of Nova Scotia, together with its subsidiaries, provides various personal, commercial, corporate, and investment banking services in Canada and internationally.

The Bank of Nova Scotia has a very low debt (total debt to equity is only 0.22), and it has a very low trailing P/E of 10.79 and a very low forward P/E of 10.47. The PEG ratio is very low at 0.90, and the average annual earnings growth estimates for the next five years is quite high at 12%. The forward annual dividend yield is quite high at 4.08%, and the payout ratio is only 44%.

The BNS stock price is 1.03% above its 20-day simple moving average, 1.68% above its 50-day simple moving average and 0.62% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Analysts like the stock. Among the 8 analysts covering the stock, four rate it as a strong buy, three rate it as a buy, and only one rates it as a hold.

BNS will report its latest quarterly financial results in August. BNS is expected to post a profit of $1.32 a share, a 7.3% rise from the company's actual earnings for the same quarter a year ago.

The compelling valuation metrics, the very rich dividend, the strong analysts' recommendation, and the fact that the stock is in an uptrend are all factors that make BNS stock quite attractive.

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Chart: finviz.com

Brooks Automation, Inc. (NASDAQ: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 5.60 and a low forward P/E of 14.13. The PEG ratio is extremely low at 0.31, and 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 3.28%, and the payout ratio is only 18%.

BRKS will report its latest quarterly financial results on August 08. BRKS is expected to post a profit of $0.04 a share, a $0.10 decline from the company's actual earnings for the same quarter a year ago.

The compelling valuation metrics, the rich dividend, and the strong earnings growth prospects, are all factors that make BRKS stock quite attractive.

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Chart: finviz.com

Comtech Telecommunications Corp. (NASDAQ:CMTL)

Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions in the United States and internationally.

Comtech Telecommunications has a low debt (total debt to equity is only 0.49), and it has a trailing P/E of 26 and a forward P/E of 25.63. The PEG ratio is very low at 0.74, and the average annual earnings growth estimates for the next five years is extremely high at 35%. The forward annual dividend yield is quite high at 4.03%, and the payout ratio is high at 105%.

The CMTL stock price is 0.14% above its 20-day simple moving average, 2.40% above its 50-day simple moving average and 7.70% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

CMTL will report its latest quarterly financial results in August. CMTL is expected to post a profit of $0.23 a share, a 39% decline from the company's actual earnings for the same quarter a year ago.

The very low PEG ratio, the very rich dividend, the very strong earnings growth prospects, and the fact that the stock is in an uptrend are all factors that make CMTL stock quite attractive.

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Chart: finviz.com

Pacific Coast Oil Trust (NYSE:ROYT)

Pacific Coast Oil Trust owns net profits interests in the sale of oil and natural gas production.

Pacific Coast Oil Trust has no debt at all, and it has a very low trailing P/E of 11.85 and a very low forward P/E of 10.45. The PEG ratio is very low at 0.94, and the average annual earnings growth estimates for the next five years is quite high at 12.6%. The forward annual dividend yield is very high at 10.47%, and the payout ratio is too high at 124%, which make me doubt about the possibility of the company to keep such a high dividend rate.

The ROYT stock price is 1.57% above its 20-day simple moving average, 0.02% above its 50-day simple moving average and 2.42% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

ROYT will report its latest quarterly financial results in August. ROYT is expected to post a profit of $0.47 a share, a $0.01 decline from the company's actual earnings for the same quarter a year ago.

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

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Chart: finviz.com

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.