Do you prefer stocks that offer both dividend income and the real possibility of capital gains? We ran a screen with this idea in mind.

We began by screening for highly liquid dividend stocks: those paying dividend yields above 2%, sustainable payout ratios below 50%, and those with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.

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.

*For an interactive version of this chart, click on the image below.*

*Tool provided by* *Kapitall**.*

Do you think these stocks offer the best of both worlds? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

** 1. Flexsteel Industries Inc. (FLXS):** Manufactures, imports, and markets residential and commercial upholstered and wooden furniture products in the United States. Market cap at $140.90M. Price at $20.87. Dividend yield at 2.90%, payout ratio at 20.86%. Current ratio at 4.37. Diluted TTM earnings per share at 1.74, and a MRQ book value per share value at 20.05, implies a Graham Number fair value = sqrt(22.5*1.74*20.05) = $28.02. Based on the stock's price at $20.05, this implies a potential upside of 39.74% from current levels.

** 2. Cascade Corp. (CASC):** Manufactures loading devices and replacement parts primarily for the lift-truck and construction industry. Market cap at $554.82M. Price at $49.87. Dividend yield at 2.81%, payout ratio at 18.82%. Current ratio at 3.74. Diluted TTM earnings per share at 5.46, and a MRQ book value per share value at 29.21, implies a Graham Number fair value = sqrt(22.5*5.46*29.21) = $59.90. Based on the stock's price at $44.92, this implies a potential upside of 33.36% from current levels.

** 3. Calamos Asset Management Inc. (CLMS):** Provides investment advisory services to individuals including high net worth individuals, and institutions. Market cap at $234.52M. Price at $11.40. Dividend yield at 3.30%, payout ratio at 41.95%. Current ratio at 14.99. Diluted TTM earnings per share at 0.88, and a MRQ book value per share value at 9.49, implies a Graham Number fair value = sqrt(22.5*0.88*9.49) = $13.71. Based on the stock's price at $10.71, this implies a potential upside of 27.99% from current levels.

** 4. Freeport-McMoRan Copper & Gold Inc. (FCX):** Engages in the exploration, mining, and production of mineral resources. Market cap at $33.23B. Price at $34.40. Dividend yield at 3.57%, payout ratio at 38.80%. Current ratio at 3.51. Diluted TTM earnings per share at 4.01, and a MRQ book value per share value at 17, implies a Graham Number fair value = sqrt(22.5*4.01*17) = $39.16. Based on the stock's price at $32.03, this implies a potential upside of 22.27% from current levels.

* 5. FutureFuel Corp. (FF):* Engages in the manufacture and sale of specialty chemicals and bio-based products primarily in the United States. Market cap at $432.62M. Price at $10.50. Dividend yield at 3.82%, payout ratio at 42.12%. Current ratio at 6.28. Diluted TTM earnings per share at 0.94, and a MRQ book value per share value at 7.08, implies a Graham Number fair value = sqrt(22.5*0.94*7.08) = $12.24. Based on the stock's price at $10.49, this implies a potential upside of 16.65% 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.