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Looking to boost your portfolio’s income, while decreasing its systemic risk? Then this may be an interesting point for your own analysis.

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

  • Beta between 0.5 and 1
  • Dividend yield above 3%
  • Significantly undervalued by the Graham Number

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

The Graham Number is 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 Graham’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. After taking the square root of both sides, the equation emerges...

We also created a price-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. To access a complete analysis of this list's recent performance, click here.




Which of these stocks do you find attractive to buy?

1. France Telecom (FTE): Telecom Services Industry. Market cap of $59.79B. Beta at 0.79. Dividend yield at 8.57%. BVPS at 15.73, diluted EPS at 2.61. Graham number = sqrt(22.5 x 15.73 x 2.61) = $30.39. Given the current price at $22.85, this implies an upside of 33.01%. The stock has gained 30.24% over the last year.

2. Edison International (NYSE:EIX): Electric Utilities Industry. Market cap of $12.81B. Beta at 0.71. Dividend yield at 3.26%. BVPS at 32.77, diluted EPS at 3.71. Graham number = sqrt(22.5 x 32.77 x 3.71) = $52.3. Given the current price at $39.37, this implies an upside of 32.85%. The stock has gained 25.94% over the last year.

3. Entergy Corporation (NYSE:ETR): Electric Utilities Industry. Market cap of $12.06B. Beta at 0.64. Dividend yield at 4.9%. BVPS at 47.88, diluted EPS at 6.95. Graham number = sqrt(22.5 x 47.88 x 6.95) = $86.53. Given the current price at $67.86, this implies an upside of 27.51%. The stock has lost 5.57% over the last year.

4. Portland General Electric Company (NYSE:POR): Electric Utilities Industry. Market cap of $1.94B. Beta at 0.68. Dividend yield at 4.12%. BVPS at 21.8, diluted EPS at 2.22. Graham number = sqrt(22.5 x 21.8 x 2.22) = $33.0. Given the current price at $25.89, this implies an upside of 27.46%. The stock has gained 42.89% over the last year.

5. Southside Bancshares Inc. (NASDAQ:SBSI): Regional Banks Industry. Market cap of $329.95M. Beta at 0.63. Dividend yield at 3.39%. BVPS at 13.54, diluted EPS at 2.14. Graham number = sqrt(22.5 x 13.54 x 2.14) = $25.53. Given the current price at $20.1, this implies an upside of 27.03%. The stock is a short squeeze candidate, with a short float at 6.95% (equivalent to 28.55 days of average volume). The stock has gained 3.4% over the last year.

6. Community Trust Bancorp Inc. (NASDAQ:CTBI): Regional Banks Industry. Market cap of $416.38M. Beta at 0.59. Dividend yield at 4.52%. BVPS at 22.53, diluted EPS at 2.32. Graham number = sqrt(22.5 x 22.53 x 2.32) = $34.29. Given the current price at $27.16, this implies an upside of 26.27%. The stock has gained 5.34% over the last year.

7. Knightsbridge Tankers Limited (NASDAQ:VLCCF): Shipping Industry. Market cap of $488.36M. Beta at 0.96. Dividend yield at 10.01%. BVPS at 15.24, diluted EPS at 1.76. Graham number = sqrt(22.5 x 15.24 x 1.76) = $24.57. Given the current price at $20.89, this implies an upside of 17.6%. The stock is a short squeeze candidate, with a short float at 12.22% (equivalent to 13.54 days of average volume). It's been a rough couple of days for the stock, losing 12.48% over the last week.

8. New York Community Bancorp Inc. (NYB): Savings & Loans Industry. Market cap of $7.06B. Beta at 0.75. Dividend yield at 6.19%. BVPS at 12.67, diluted EPS at 1.23. Graham number = sqrt(22.5 x 12.67 x 1.23) = $18.73. Given the current price at $16.15, this implies an upside of 15.95%. The stock is a short squeeze candidate, with a short float at 5.53% (equivalent to 7.49 days of average volume). The stock has gained 6.53% over the last year.

9. United Bankshares Inc. (NASDAQ:UBSI): Regional Banks Industry. Market cap of $1.04B. Beta at 0.95. Dividend yield at 5.02%. BVPS at 18.32, diluted EPS at 1.66. Graham number = sqrt(22.5 x 18.32 x 1.66) = $26.16. Given the current price at $24.11, this implies an upside of 8.5%. The stock is a short squeeze candidate, with a short float at 13.59% (equivalent to 41.16 days of average volume). The stock has lost 7.08% over the last year.

10. Washington Trust Bancorp Inc. (NASDAQ:WASH): Regional Banks Industry. Market cap of $371.64M. Beta at 0.81. Dividend yield at 3.85%. BVPS at 16.87, diluted EPS at 1.59. Graham number = sqrt(22.5 x 16.87 x 1.59) = $24.57. Given the current price at $23.0, this implies an upside of 6.81%. The stock has gained 30.61% over the last year.

*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.

Source: 10 Low Beta, High Yield Stocks Undervalued by the Graham Number