# 15 Rallying High-Yield Stocks Undervalued by Graham's Standards

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Includes: ANAT, ANH, BPO, CMO, FNF, GSH, MFA, NLY, OB, PNC, PNNT, PSEC, SKM, TCAP, TRV
by: Kapitall

If you are looking for momentum ideas to boost your portfolioâ€™s income, then this may be an interesting starting point for your own analysis.

To construct this list we looked for stocks with the following characteristics:

• Trading above the 20-,50- and 200-day moving averages
• Dividend yield above 2%
• Trading at a significant discount to the Graham Number

click for expanded images

The Graham Number was considered to be the maximum price an investor should pay for a stock, according to the formula developed by Benjamin Graham. ?

It is calculated as follows:?

Graham Number = Square Root of (22.5) x (Earnings per Share) x (Book Value per Share).?

This equation is predicated on Grahamâ€™s belief that the price-to-earnings (P/EPS) ratio should be no more than 15, and the price-to-book value (P/BVPS) ratio should be no more than 1.5.?

Therefore we only included companies that meet both of these criteria. As a result, the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5.

We also created an equal weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. As the graph shows, beginning last week our list's performance values have rose above the market. To access a complete analysis of this list's recent performance, click here.

Considering this data, which of these dividend-paying names do you think is more likely to reach its Graham Number in the coming weeks or months?

1. Brookfield Properties Corporation (NYSE:BPO): Property Management Industry. Market cap of \$9.87B. This stock is trading 0.01% above its 20-day MA, 5.72% above its 50-day MA, and 14.44% above its 200-day MA. Dividend yield at 2.85%. BVPS at \$16.02, diluted EPS at \$2.84. Graham number = sqrt(22.5 x \$16.02 x \$2.84) = \$31.99. This implies a discount of 39.9%, given the current price of \$19.23. The stock has gained 30.71% over the last year.

2. Annaly Capital Management, Inc. (NYSE:NLY): REIT Industry. Market cap of \$14.44B. This stock is trading 1.28% above its 20-day MA, 2.48% above its 50-day MA, and 6.51% above its 200-day MA. Dividend yield at 13.82%. BVPS at \$15.76, diluted EPS at \$2.5. Graham number = sqrt(22.5 x \$15.76 x \$2.5) = \$29.77. This implies a discount of 39.88%, given the current price of \$17.9. The stock has gained 30.26% over the last year.

3. American National Insurance Co. (NASDAQ:ANAT): Life Insurance Industry. Market cap of \$2.14B. This stock is trading 0.95% above its 20-day MA, 1.12% above its 50-day MA, and 0.03% above its 200-day MA. Dividend yield at 3.85%. BVPS at \$136.77, diluted EPS at \$5.4. Graham number = sqrt(22.5 x \$136.77 x \$5.4) = \$128.91. This implies a discount of 38.44%, given the current price of \$79.36. The stock has lost 23.23% over the last year.

4. Anworth Mortgage Asset Corporation (NYSE:ANH): REIT Industry. Market cap of \$919.87M. This stock is trading 1.79% above its 20-day MA, 3.83% above its 50-day MA, and 8.53% above its 200-day MA. Dividend yield at 13.76%. BVPS at \$6.95, diluted EPS at \$0.85. Graham number = sqrt(22.5 x \$6.95 x \$0.85) = \$11.53. This implies a discount of 37.38%, given the current price of \$7.22. The stock has gained 27.77% over the last year.

5. OneBeacon Insurance Group, Ltd. (NYSE:OB): Surety & Title Insurance Industry. Market cap of \$1.34B. This stock is trading 2.44% above its 20-day MA, 3.79% above its 50-day MA, and 2.92% above its 200-day MA. Dividend yield at 5.94%. BVPS at \$13.25, diluted EPS at \$1.69. Graham number = sqrt(22.5 x \$13.25 x \$1.69) = \$22.45. This implies a discount of 37.36%, given the current price of \$14.06. The stock has gained 16.09% over the last year.

6. Fidelity National Financial, Inc. (NYSE:FNF): Surety & Title Insurance Industry. Market cap of \$3.48B. This stock is trading 3.65% above its 20-day MA, 8.1% above its 50-day MA, and 11.43% above its 200-day MA. Dividend yield at 3.08%. BVPS at \$15.56, diluted EPS at \$1.74. Graham number = sqrt(22.5 x \$15.56 x \$1.74) = \$24.68. This implies a discount of 36.67%, given the current price of \$15.63. The stock has gained 9.49% over the last year.

7. The Travelers Companies, Inc. (NYSE:TRV): Property & Casualty Insurance Industry. Market cap of \$26.75B. This stock is trading 2.36% above its 20-day MA, 5.08% above its 50-day MA, and 14.46% above its 200-day MA. Dividend yield at 2.57%. BVPS at \$59.9, diluted EPS at \$7.32. Graham number = sqrt(22.5 x \$59.9 x \$7.32) = \$99.33. This implies a discount of 36.45%, given the current price of \$63.12. The stock has gained 31.86% over the last year.

8. MFA Financial, Inc. (NYSE:MFA): REIT Industry. Market cap of \$2.30B. This stock is trading 3.73% above its 20-day MA, 3.16% above its 50-day MA, and 8.47% above its 200-day MA. Dividend yield at 11.46%. BVPS at \$8.13, diluted EPS at \$0.91. Graham number = sqrt(22.5 x \$8.13 x \$0.91) = \$12.9. This implies a discount of 36.37%, given the current price of \$8.21. The stock has gained 29.34% over the last year.

9. PennantPark Investment Corporation (NASDAQ:PNNT): Asset Management Industry. Market cap of \$559.27M. This stock is trading 1.04% above its 20-day MA, 1.35% above its 50-day MA, and 7.6% above its 200-day MA. Dividend yield at 8.8%. BVPS at \$11.3, diluted EPS at \$1.4. Graham number = sqrt(22.5 x \$11.3 x \$1.4) = \$18.87. This implies a discount of 36.02%, given the current price of \$12.07. The stock has gained 34.25% over the last year.

10. Capstead Mortgage Corp. (NYSE:CMO): Mortgage Investment Industry. Market cap of \$934.83M. This stock is trading 0.74% above its 20-day MA, 1.99% above its 50-day MA, and 12.52% above its 200-day MA. Dividend yield at 12.3%. BVPS at \$12.07, diluted EPS at \$1.52. Graham number = sqrt(22.5 x \$12.07 x \$1.52) = \$20.32. This implies a discount of 35.28%, given the current price of \$13.15. The stock has gained 41.06% over the last year.

11. Prospect Capital Corporation (NASDAQ:PSEC): Asset Management Industry. Market cap of \$1.06B. This stock is trading 1.08% above its 20-day MA, 0.11% above its 50-day MA, and 14.03% above its 200-day MA. Dividend yield at 10.08%. BVPS at \$10.25, diluted EPS at \$1.36. Graham number = sqrt(22.5 x \$10.25 x \$1.36) = \$17.71. This implies a discount of 33.15%, given the current price of \$11.84. The stock is a short squeeze candidate, with a short float at 9.42% (equivalent to 5.48 days of average volume). The stock has gained 21.84% over the last year.

12. Guangshen Railway Co. Ltd. (NYSE:GSH): Railroads Industry. Market cap of \$3.03B. This stock is trading 7.01% above its 20-day MA, 11.75% above its 50-day MA, and 12.47% above its 200-day MA. Dividend yield at 3.22%. BVPS at \$26.25, diluted EPS at \$1.7. Graham number = sqrt(22.5 x \$26.25 x \$1.7) = \$31.69. This implies a discount of 33.0%, given the current price of \$21.23.

13. SK Telecom Co. Ltd. (NYSE:SKM): Wireless Communications Industry. Market cap of \$12.89B. This stock is trading 3.61% above its 20-day MA, 5.39% above its 50-day MA, and 9.23% above its 200-day MA. Dividend yield at 3.95%. BVPS at \$16.41, diluted EPS at \$2.31. Graham number = sqrt(22.5 x \$16.41 x \$2.31) = \$29.2. This implies a discount of 32.99%, given the current price of \$19.57.

14. PNC Financial Services Group Inc. (NYSE:PNC): Money Center Banks Industry. Market cap of \$33.35B. This stock is trading 2.05% above its 20-day MA, 2.41% above its 50-day MA, and 9.14% above its 200-day MA. Dividend yield at 2.21%. BVPS at \$57.96, diluted EPS at \$6.61. Graham number = sqrt(22.5 x \$57.96 x \$6.61) = \$92.84. This implies a discount of 31.61%, given the current price of \$63.5. The stock has lost 6.51% over the last year.

15. Triangle Capital Corporation (NYSE:TCAP): Asset Management Industry. Market cap of \$353.57M. This stock is trading 3.96% above its 20-day MA, 3.49% above its 50-day MA, and 9.33% above its 200-day MA. Dividend yield at 8.82%. BVPS at \$13.42, diluted EPS at \$2.4. Graham number = sqrt(22.5 x \$13.42 x \$2.4) = \$26.92. This implies a discount of 30.53%, given the current price of \$18.7.

*Relevant data sourced from Yahoo! Finance and Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.