Are you a dividend investor looking for strong yields? If so, you're in luck, because today we focused on dividend stocks offering high yields (5%+), despite appearing undervalued by their fundamentals. To separate the wheat from the chaff, we only included stocks that analysts have rated as 'Buy' recently. We came up with a varied, but intriguing list of high yielders.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
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 stocks with a very high yield (more than 5%). We next screened for businesses that appear undervalued from a price-multiple perspective (P/E<10)(forward P/E<10). We then looked for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We did not screen out any market caps or sectors.
Do you think these stocks hold value that has yet to be priced in? Use our list to help with your own analysis.
1) Gannett Co., Inc. (GCI)
|Industry:||Publishing - Newspapers|
Gannett Co., Inc. has a Dividend Yield of 5.46%, a Payout Ratio of 21.77%, a Price/Earnings Ratio of 8.14, a Forward Price/Earnings Ratio of 6.79, and a Analysts' Rating of 2.50. The short interest was 10.44% as of 07/10/2012. Gannett Co., Inc. operates as a media and marketing solutions company in the United States and internationally.
2) Pitney Bowes Inc. (PBI)
Pitney Bowes Inc. has a Dividend Yield of 10.53%, a Payout Ratio of 73.96%, a Price/Earnings Ratio of 7.16, a Forward Price/Earnings Ratio of 7.35, and a Analysts' Rating of 2.20. The short interest was 27.74% as of 07/10/2012. Pitney Bowes Inc. provides software, hardware, and services to enable physical and digital communications. It also offers a suite of equipment, supplies, software, services, and solutions for managing and integrating physical and digital communication channels. The company's Small & Medium Business Solutions group engages in the sale, rental, and financing of mail finishing, mail creation, and shipping equipment and software; provision of supply, support, and other professional services; and provision of payment solutions.
3) Safe Bulkers, Inc. (SB)
Safe Bulkers, Inc. has a Dividend Yield of 9.69%, a Payout Ratio of 51.64%, a Price/Earnings Ratio of 5.25, a Forward Price/Earnings Ratio of 4.36, and a Analysts' Rating of 2.20. The short interest was 1.80% as of 07/10/2012. Safe Bulkers, Inc. provides marine drybulk transportation services worldwide. The company transports various bulk cargoes, primarily coal, grain, and iron ore. As of March 21, 2012, it had a fleet of 20 dry bulk vessels.
4) Banco Macro S.A. (BMA)
|Industry:||Foreign Regional Banks|
Banco Macro S.A. has a Dividend Yield of 17.73%, a Price/Earnings Ratio of 2.54, a Forward Price/Earnings Ratio of 2.36, and a Analysts' Rating of 2.20. The short interest was 1.69% as of 07/10/2012. 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.
5) Alliance Resource Partners LP (ARLP)
|Industry:||Industrial Metals & Minerals|
Alliance Resource Partners LP has a Dividend Yield of 6.74%, a Payout Ratio of 49.02%, a Price/Earnings Ratio of 7.93, a Forward Price/Earnings Ratio of 8.30, and a Analysts' Rating of 2.00. The short interest was 1.25% as of 07/10/2012. Alliance Resource Partners, L.P. engages in the production and marketing of coal primarily to utilities and industrial users in the United States.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.