The Most Unloved 9% Yielder In The Equity Universe

| About: R.R. Donnelley (RRD)

Thanks to the Federal Reserve and anemic economic growth, we live in an ultra low yield world. That makes it all the more surprising when you come across a high yield stock with a reasonable valuation that has not run up in the huge rally over the last three or four months. For your consideration, I give you R.R. Donnelly; the most unloved 9% yielding stock in the equity universe.

R.R. Donnelley & Sons (NASDAQ:RRD):

R.R. Donnelley & Sons Company provides pre-media, printing, logistics, and business process outsourcing products and services to private and public sectors worldwide. The company operates primarily in the commercial print portion of the printing industry, with related product and service offerings designed to offer customers solutions for communicating their messages to target audiences. (Business Description from Yahoo Finance)

6 reasons RRD is a solid value at under $12 a share:

  • It has solid operating cash flow (under 3 times market capitalization) and yields a robust 9%.
  • Although not growing, RDD has consistent earnings. RRD earned $1.79 in FY2010, is scheduled to make $1.80 in FY2011 and analysts have it earning $1.74 a share in FY2012.
  • The median analysts' price target on RRD is $19.50. S&P has a "Buy" rating on RRD and a price target of $17 on the stock.
  • Insiders have gobbled up more than 200,000 shares in last four months at higher prices.
  • The stock is selling near the bottom of its five year valuation based on P/E, P/S and P/CF.
  • It is growing market share in a declining business. It should continue to be able to make cheap acquisitions in the printing business as weaker firms sell at fire sale prices.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RRD over the next 72 hours.