6 Outperforming Dividend Stocks Undervalued By The Graham Number

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 |  Includes: BOX-OLD, FNF, HBAN, HTLF, PEBO, SALM
by: Kapitall

Do you prefer stocks that offer both value and the possibility for growth? With this idea in mind, we ran a screen.

We began by screening for stocks paying dividend yields above 2% and sustainable payout ratios below 50% that have also outperformed the market over the last quarter, with quarterly performance above 10%.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

Tool provided by Kapitall.

Do you think these stocks will continue to outperform the market? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Peoples Bancorp Inc. (NASDAQ:PEBO): Operates as a holding company for Peoples Bank, National Association that provides financial products and services. Market cap at $199.4M, most recent closing price at $18.61. Dividend yield at 2.36%, payout ratio at 19.93%. Performance over the last quarter at 16.11%. Diluted TTM earnings per share at 1.57, and a MRQ book value per share value at 19.83, implies a Graham Number fair value = sqrt(22.5*1.57*19.83) = $26.47. Based on the stock's price at $19.05, this implies a potential upside of 38.93% from current levels.

2. Huntington Bancshares Incorporated (NASDAQ:HBAN): Operates as the holding company for The Huntington National Bank that provides commercial and consumer banking services. Market cap at $5.56B, most recent closing price at $6.42. Dividend yield at 2.49%, payout ratio at 20.88%. Performance over the last quarter at 10.67%. Diluted TTM earnings per share at 0.62, and a MRQ book value per share value at 5.97, implies a Graham Number fair value = sqrt(22.5*0.62*5.97) = $9.13. Based on the stock's price at $6.61, this implies a potential upside of 38.06% from current levels.

3. Heartland Financial USA Inc. (NASDAQ:HTLF): Provides commercial and retail banking services to businesses and individuals. Market cap at $306.22M, most recent closing price at $18.51. Dividend yield at 2.15%, payout ratio at 22.46%. Performance over the last quarter at 18.73%. Diluted TTM earnings per share at 1.76, and a MRQ book value per share value at 17.09, implies a Graham Number fair value = sqrt(22.5*1.76*17.09) = $26.01. Based on the stock's price at $18.90, this implies a potential upside of 37.64% from current levels.

4. Fidelity National Financial, Inc. (NYSE:FNF): Provides title insurance, mortgage services, specialty insurance, and information services in the United States. Market cap at $4.2B, most recent closing price at $18.79. Dividend yield at 2.97%, payout ratio at 35.30%. Performance over the last quarter at 10.04%. Diluted TTM earnings per share at 1.81, and a MRQ book value per share value at 17.07, implies a Graham Number fair value = sqrt(22.5*1.81*17.07) = $26.37. Based on the stock's price at $19.21, this implies a potential upside of 37.25% from current levels.

5. SeaCube Container Leasing Ltd. (NYSE:BOX-OLD): Operates as a container leasing company worldwide. Market cap at $368.67M, most recent closing price at $18.01. Dividend yield at 6.16%, payout ratio at 46.85%. Performance over the last quarter at 13.07%. Diluted TTM earnings per share at 1.99, and a MRQ book value per share value at 11.26, implies a Graham Number fair value = sqrt(22.5*1.99*11.26) = $22.45. Based on the stock's price at $18.1, this implies a potential upside of 24.05% from current levels.

6. Salem Communications Corp. (NASDAQ:SALM): Operates as a radio broadcasting company that provides programming to audiences interested in Christian and family-themed content in the United States. Market cap at $111.87M, most recent closing price at $4.71. Dividend yield at 3.04%, payout ratio at 16.68%. Performance over the last quarter at 76.25%. Diluted TTM earnings per share at 0.16, and a MRQ book value per share value at 8.37, implies a Graham Number fair value = sqrt(22.5*0.16*8.37) = $5.49. Based on the stock's price at $4.69, this implies a potential upside of 17.04% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, 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.