Are you a dividend investor searching out companies that pay their fair share in dividend income? Do you prefer high yields, matched with sustainable payout ratios? If so, we ran a screen keeping this idea in mind. The companies we focused on today not only have those traits, but also have good analyst ratings. We also sought companies that look undervalued from a price-multiple perspective. We think you'll like the list we came up with.
The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.
We first looked for small cap REITs that have a very high dividend yield (Div. Yield > 10%). From here, we then looked for companies that appear undervalued to earnings growth (PEG < 1)(forward P/E<10). We next screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3).
Do you think these small-cap stocks will break through to new highs? Use our list along with your own analysis.
1) PennyMac Mortgage Investment Trust (PMT)
|Industry:||REIT - Residential|
PennyMac Mortgage Investment Trust has a Dividend Yield of 11.92% and Payout Ratio of 73.68% and Price/Earnings to Growth Ratio of 0.27 and Forward Price/Earnings Ratio of 6.34 and Analysts' Rating of 1.80. The short interest was 3.46% as of 05/31/2012. PennyMac Mortgage Investment Trust is based in the United States..
2) Apollo Commercial Real Estate Finance, Inc. (ARI)
|Industry:||REIT - Diversified|
Apollo Commercial Real Estate Finance, Inc. has a Dividend Yield of 10.08% and Payout Ratio of 107.95% and Price/Earnings to Growth Ratio of 0.88 and Forward Price/Earnings Ratio of 9.17 and Analysts' Rating of 2.10. The short interest was 3.88% as of 05/31/2012. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. It originates, acquires, invests in, and manages performing commercial first mortgage loans, commercial mortgage-backed securities, mezzanine financings, and other commercial real estate-related debt investments. The company is qualified as a real estate investment trust (REIT) under the Internal Revenue Code.
3) Newcastle Investment Corp. (NCT)
|Industry:||REIT - Diversified|
Newcastle Investment Corp. has a Dividend Yield of 12.07% and Payout Ratio of 32.29% and Price/Earnings to Growth Ratio of 0.90 and Forward Price/Earnings Ratio of 4.54 and Analysts' Rating of 1.60. The short interest was 3.14% as of 05/31/2012. Newcastle Investment Corp. operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. The company's portfolio of real estate securities includes commercial mortgage backed securities, senior unsecured debt issued by property REITs, real estate related asset backed securities, and agency residential mortgage backed securities. Newcastle also owns interest in loans and pools of loans, including real estate related loans, commercial mortgage loans, residential mortgage loans, and manufactured housing loans.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.