Do you consider yourself a dividend investor, looking for strong yields and sustainable payouts? One place to search is among companies with strong track records of profitability, since after all, it's profits that fuel dividends. Today we focus on stocks with commendable dividends, yet that also look undervalued from their price-multiple ratios. Our screen produced a diverse list of companies - we hope you enjoy.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
We first looked for dividend stocks. We then screened for businesses that are trading at a discount (P/S<1)(P/BV<1). We then screened for businesses that have strong profitability (1-year fiscal EPS Growth Rate>10%)(Net Margin [TTM]>10%). We did not screen out any market caps or sectors.
Do you think these stocks are at too low of valuations, given their fundamentals? Use our screened list as a starting point for your own analysis.
1) Transportadora de Gas Del Sur S.A. (TGS)
Transportadora de Gas Del Sur S.A. has a Dividend Yield of 84.57%, a Payout Ratio of 0.00%, a Price/Sales Ratio of 0.68, a Price/Book Value Ratio of 0.62, a Earnings Per Share Growth Rate of 70.79%, and a Net Margin of 12.44%. The short interest was 0.29% as of 06/13/2012. Transportadora de Gas del Sur S.A. engages in the transportation of natural gas primarily in Latin America. The company transports its natural gas to distribution companies, industries, traders, producers, and power plant operators, as well as for natural gas end users through operating approximately 8627 kilometers pipeline system. It is also involved in the production and commercialization of natural gas liquids, including ethane, propane, butane, and natural gasoline in Argentina and internationally.
2) Banco Macro S.A. (BMA)
|Industry:||Foreign Regional Banks|
Banco Macro S.A. has a Dividend Yield of 17.73%, a Payout Ratio of 0.00%, a Price/Sales Ratio of 0.67, a Price/Book Value Ratio of 0.65, a Earnings Per Share Growth Rate of 38.79%, and a Net Margin of 24.96%. The short interest was 0.21% as of 06/13/2012. Banco Macro S.A. provides banking products and services to individuals, entrepreneurs, companies, and corporate customers in Argentina. It offers various retail products and services, such as savings and checking accounts, time deposits, credit and debit cards, consumer finance loans, mortgage loans, car loans, overdrafts, credit-related services, home and car insurance coverage, tax collection, utility payments, automated teller machines (ATMs), and money transfer services. The company also provides personal loans, document discounts, mortgages, overdrafts, pledged loans, and credit card loans to retail customers.
3) Guangshen Railway Co. Ltd. (GSH)
Guangshen Railway Co. Ltd. has a Dividend Yield of 4.93%, a Payout Ratio of 39.26%, a Price/Sales Ratio of 0.99, a Price/Book Value Ratio of 0.57, a Earnings Per Share Growth Rate of 21.40%, and a Net Margin of 12.27%. The short interest was 3.64% as of 06/13/2012. Guangshen Railway Company Limited provides passenger and freight transportation services on the Shenzhen-Guangzhou-Pingshi railway in the People's Republic of China. The company's freight services include the transportation of full load and single load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo, and oversized cargo. It also offers long distance passenger transportation services. In addition, the company engages in the sale of food, beverages, and merchandise on board the trains and in railway stations, as well as materials and supplies, maintenance, and repair of trains. Further, it provides travel agency, warehousing, hotel management, catering management and services, and advertising services; and railway network usage and services, including the locomotive traction, track usage, electric catenaries, vehicle coupling, and other services, as well as engages in the property management and supervision of construction projects.
4) Cresud Sociedad An (CRESY)
Cresud Sociedad An has a Dividend Yield of 4.16%, a Payout Ratio of 42.66%, a Price/Sales Ratio of 0.56, a Price/Book Value Ratio of 0.75, a Earnings Per Share Growth Rate of 12.59%, and a Net Margin of 10.38%. The short interest was 0.39% as of 06/13/2012. Cresud, Inc., an agricultural company, engages in crop production, cattle raising, and milk production in Argentina. The company engages in the planting and harvesting, and sale of fine and coarse grains and oilseeds, including wheat, corn, soybeans, and sunflowers.
5) PNM Resources, Inc. (PNM)
PNM Resources, Inc. has a Dividend Yield of 3.10%, a Payout Ratio of 24.76%, a Price/Sales Ratio of 0.92, a Price/Book Value Ratio of 0.94, a Earnings Per Share Growth Rate of 497.86%, and a Net Margin of 11.83%. The short interest was 3.12% as of 06/13/2012. PNM Resources, Inc., together with its subsidiaries, operates in energy and energy-related businesses in the United States. It primarily engages in the generation, transmission, and distribution of electricity. The company generates electricity using coal, nuclear, natural gas, solar, and wind energy.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.