Do you like to be able to rely on a stock's dividend income as a source of return? For ideas on how to start your own search for dividend stocks, we ran a screen.
We began by screening for dividend stocks, paying dividend yields between 2-7% and sustainable payout ratios below 50%. We then checked for companies with strong liquidity, with current ratios above 3. The current ratio equals current assets/current liabilities. Therefore companies with current ratios above 3 have liquid assets at least 3 times the amount of their upcoming debts.
Finally, we screened for companies that also appear undervalued, relative to EPS trends. Based on the assumption that P/E is equal to a constant k, increases in EPS estimates should be matched by proportionate increases in price. When they don't match up, a mispricing may have occurred. That is, stocks with faster growth in EPS than price may be underestimated by the market and undervalued.
We screened for stocks seeing faster growth in than EPS over the last 30 days by at least 5%.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these dividend stocks have more value to price in? Use this list as a starting point for your own analysis.
List sorted by difference between growth in EPS and price, which may indicate that the stock is undervalued.
1. Cameco Corp. (CCJ): Operates as a uranium producer, supplier of conversion services, and fuel manufacturer. Market cap at $7.95B. Price at $19.74. Dividend yield at 2.00%, payout ratio at 35.05%. Current ratio at 3.65. The EPS estimate for the company's current year increased from 1.24 to 1.25 over the last 30 days, an increase of 0.81%. This increase came during a time when the stock price changed by -13.76% (from 23.69 to 20.43 over the last 30 days).
2. Cal-Maine Foods, Inc. (CALM): Engages in the production, grading, packaging, marketing and distribution of shell eggs primarily in the southeastern, southwestern, mid-western and mid-Atlantic regions of the United States. Market cap at $892.40M. Price at $37.33. Dividend yield at 2.23%, payout ratio at 33.30%. Current ratio at 3.11. The EPS estimate for the company's current year increased from 2.68 to 2.75 over the last 30 days, an increase of 2.61%. This increase came during a time when the stock price changed by -7.09% (from 41.17 to 38.25 over the last 30 days).
3. Janus Capital Group, Inc. (JNS): A publicly owned asset management holding company. Market cap at $1.57B. Price at $8.11. Dividend yield at 2.41%, payout ratio at 19.59%. Current ratio at 5.62. The EPS estimate for the company's current year increased from 0.64 to 0.66 over the last 30 days, an increase of 3.13%. This increase came during a time when the stock price changed by -2.86% (from 8.75 to 8.5 over the last 30 days).
*EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.