Are you a dividend investor looking for stocks that pay out high yields at a sustainable pace? If so, one place to look is in the small-cap space, particularly for companies that have received votes of confidence from analysts, as a way to hone in on the absolute best in class. As an added bonus, we focused further on companies that look undervalued from a price-multiple standpoint. We came up with a pretty interesting list.
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 dollar's 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 dollar's 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 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 dividend stocks. We then looked for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). Next, we then screened for businesses that are trading at a discount (P/S<1)(forward P/E<10). We did not screen out any sectors.
Do you think these small-cap stocks failed to price their value accurately? Please use our list to assist with your own analysis.
1) Roundy's, Inc. (RNDY)
Roundy's, Inc. has a Dividend Yield of 8.92%, a Analysts' Rating of 2.20, a Price/Sales Ratio of 0.12, and a Forward Price/Earnings Ratio of 7.64. The short interest was 10.96% as of 07/06/2012. Roundy's, Inc. engages in the operation of retail grocery stores under the Pick n Save, Rainbow, Copps, Metro Market, and Mariano's Fresh Market retail banners. Its stores offer non-perishable food products, including grocery, frozen, and dairy products; perishable products, such as produce, meat, seafood, deli, bakery, and floral; and non-food products comprising general merchandise, health and beauty care, pharmacy, and alcohol. The company's stores provide its products under national brands, as well as under its own brands, including Roundy's Select, Roundy's, and Clear Value.
2) Ryder System, Inc. (R)
|Industry:||Rental & Leasing Services|
Ryder System, Inc. has a Dividend Yield of 3.31%, a Payout Ratio of 32.92%, a Analysts' Rating of 1.90, a Price/Sales Ratio of 0.29, and a Forward Price/Earnings Ratio of 8.05. The short interest was 3.55% as of 07/06/2012. Ryder System, Inc. provides transportation and supply chain management solutions. It operates in three segments: Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Contract Carriage (DCC). The FMS segment offers leasing, contract maintenance, contract-related maintenance, and commercial rental of trucks, tractors, and trailers primarily in the United States, Canada, and the United Kingdom.
3) Sinclair Broadcast Group Inc. (SBGI)
|Industry:||Broadcasting - TV|
Sinclair Broadcast Group Inc. has a Dividend Yield of 4.86%, a Payout Ratio of 42.50%, a Analysts' Rating of 2.00, a Price/Sales Ratio of 0.99, and a Forward Price/Earnings Ratio of 8.03. The short interest was 5.95% as of 07/06/2012. Sinclair Broadcast Group, Inc., a television broadcasting company, owns or provides programming, operating, or sales services to television stations and other commercial broadcasting groups in the United States. It broadcasts free over-the-air programming, such as network provided programs, news produced locally, local sporting events, programming from program service arrangements, syndicated entertainment programs, and other locally produced programs. The company owns or provides programming and operating services pursuant to local marketing agreements, or provides sales services pursuant to outsourcing agreements to 73 television stations in 45 markets.
*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.