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If a company’s P/E ratio has fallen over time, as its earnings steadily rise, it is a sign that price has not proportionately increased with earnings. In other words, the company’s earnings may not be fully priced into the stock, and the stock may be undervalued.

We ran a screen on dividend stocks that are rallying above their 20-day, 50-day and 200-day moving averages for those exhibiting these trends: A falling P/E ratio (comparing the trailing-twelve-month ratio to the three-year average) and rising EPS over the same time period.

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.‬



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.

Click to enlarge


Do you think the market is undervaluing these stocks? Use this list as a starting point for your own analysis.

List sorted by dividend yield.

1. Eli Lilly & Co. (NYSE:LLY): Develops, manufactures and sells pharmaceutical products worldwide. Market cap of $43.03B. Dividend yield at 5.27%, payout ratio at 47.91%. The stock is currently trading at 2.75% above its 20-Day SMA, 2.01% above its 50-Day SMA, and 5.77% above its 200-Day SMA. TTM P/E at 8.73 vs. three-year average at 16.45. Last year diluted EPS at $4.58 vs. 2-year prior EPS at $3.94. Offers a good dividend, and appears to have good liquidity to back it up - dividend yield at 5.27%, current ratio at 1.73, and quick ratio at 1.4. The stock has gained 9.97% over the last year.

2. Kansas City Life Insurance Company (NASDAQ:KCLI):
Operates as a financial services company that primarily focuses on the sale and administration of life and annuity insurance products in the United States. Market cap of $354.88M. Dividend yield at 3.49%, payout ratio at 45.46%. The stock is currently trading at 1.22% above its 20-Day SMA, 2.54% above its 50-Day SMA, and 0.61% above its 200-Day SMA. TTM P/E at 13.02 vs. three-year average at 61.66. Last year diluted EPS at $1.94 vs. two-year prior EPS at $0.93. The stock has gained 0.06% over the last year.

3. Foot Locker, Inc. (NYSE:FL):
Operates as a retailer of athletic footwear and apparel. Market cap of $3.25B. Dividend yield at 3.10%, payout ratio at 40.42%. The stock is currently trading at 8.50% above its 20-Day SMA, 3.36% above its 50-Day SMA, and 5.22% above its 200-Day SMA. TTM P/E at 13.81 vs. three-year average at 35.35. Last year diluted EPS at $1.08 vs. two-year prior EPS at $0.30. The stock has had a good month, gaining 10.16%.

4. Erie Indemnity Co. (NASDAQ:ERIE): Provides sales, underwriting and policy issuance services to the policyholders of Erie Insurance Exchange in the United States. Market cap of $3.57B. Dividend yield at 2.81%, payout ratio at 30.79%. The stock is currently trading at 0.87% above its 20-Day SMA, 0.93% above its 50-Day SMA and 5.68% above its 200-Day SMA. TTM P/E at 12.54 vs. three-year average at 15.85. Last year diluted EPS at $2.85 vs. two-year prior EPS at $1.89. The stock has gained 37.38% over the last year.

5. The Coca-Cola Company (NYSE:KO):
Distributes and markets nonalcoholic beverages worldwide. Market cap of $160.20B. Dividend yield at 2.69%, payout ratio at 33.38%. The stock is currently trading at 2.52% above its 20-Day SMA, 3.88% above its 50-Day SMA and 8.35% above its 200-Day SMA. TTM P/E at 13.04 vs. three-year average at 16.35. Last year diluted EPS at $5.06 vs. two-year prior EPS at $2.93. The stock has gained 24.97% over the last year.

6. Microsoft Corporation (NASDAQ:MSFT): Develops, licenses and supports a range of software products and services for various computing devices worldwide. Market cap of $222.02B. Dividend yield at 2.42%, payout ratio at 23.33%. The stock is currently trading at 5.50% above its 20-Day SMA, 3.42% above its 50-Day SMA and 3.78% above its 200-Day SMA. TTM P/E at 9.81 vs. three-year average at 12.30. Last year diluted EPS at $2.69 vs. two-year prior EPS at $2.10. Might be undervalued at current levels, with a PEG ratio at 0.87, and P/FCF ratio at 11.41. The stock has gained 8.16% over the last year.

7. Renaissance Learning Inc. (NASDAQ:RLRN):
Provides computer-based assessment and periodic progress monitoring technology for pre-kindergarten through senior high schools and districts in the United States and internationally. Market cap of $454.79M. Dividend yield at 2.07%, payout ratio at 38.10%. The stock is currently trading at 2.20% above its 20-Day SMA, 13.34% above its 50-Day SMA, and 30.94% above its 200-Day SMA. TTM P/E at 18.44 vs. three-year average at 101.59. Last year diluted EPS at $0.82 vs. two-year prior EPS at $0.68. The stock has had a good month, gaining 30.94%.

8. Standard Motor Products Inc. (NYSE:SMP): Distributes replacement parts for motor vehicles in the automotive aftermarket industry primarily in the United States, Canada and Latin America. Market cap of $322.52M. Dividend yield at 1.99%, payout ratio at 15.80%. The stock is currently trading at 12.94% above its 20-Day SMA, 3.94% above its 50-Day SMA, and 4.37% above its 200-Day SMA. TTM P/E at 9.35 vs. three-year average at 214.45. Last year diluted EPS at $1.09 vs. two-year prior EPS at $0.30. This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has had a couple of great days, gaining 8.14% over the last week.

9. Newmont Mining Corp. (NYSE:NEM):
Engages in the acquisition, exploration and production of gold and copper properties. Market cap of $34.87B. Dividend yield at 1.87%, payout ratio at 13.30%. The stock is currently trading at 1.97% above its 20-Day SMA, 8.22% above its 50-Day SMA, and 12.84% above its 200-Day SMA. TTM P/E at 13.34 vs. three-year average at 17.93. Last year diluted EPS at $4.61 vs. two-year prior EPS at $2.69. The stock has gained 3.45% over the last year.

10. Activision Blizzard, Inc. (NASDAQ:ATVI):
Publishes online, personal computer, console, handheld and mobile games of interactive entertainment worldwide. Market cap of $13.70B. Dividend yield at 1.38%, payout ratio at 32.26%. The stock is currently trading at 5.21% above its 20-Day SMA, 4.01% above its 50-Day SMA, and 4.94% above its 200-Day SMA. TTM P/E at 21.62 vs. three-year average at 53.72. Last year diluted EPS at $0.33 vs. two-year prior EPS at $0.09. The stock has gained 7.82% over the last year.

*P/E and EPS data sourced from Screener.co, all other data sourced from Finviz.

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

Source: 10 Rallying Dividend Stocks With Falling P/E And Rising Earnings