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

We began by screening for high dividend yield stocks: those paying dividend yields above 4% and sustainable payout ratios below 50%.

We then screened that universe for those that 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. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall. More investing ideas on Kapitall Wire.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Ampco-Pittsburgh Corp. (AP): Manufactures and sells custom-engineered equipment in the United States and internationally. Market cap at $165.34M, most recent closing price at $16.40. Dividend yield at 4.50%, payout ratio at 47.57%. Diluted TTM earnings per share at 1.5, and a MRQ book value per share value at 19.06, implies a Graham Number fair value = sqrt(22.5*1.5*19.06) = $25.36. Based on the stock's price at $18.14, this implies a potential upside of 39.82% from current levels.

2. SeaCube Container Leasing Ltd. (BOX-OLD): Operates as a container leasing company worldwide. Market cap at $353.45M, most recent closing price at $17.69. Dividend yield at 6.43%, payout ratio at 47.00%. Diluted TTM earnings per share at 1.99, and a MRQ book value per share value at 11.26, implies a Graham Number fair value = sqrt(22.5*1.99*11.26) = $22.45. Based on the stock's price at $17.02, this implies a potential upside of 31.93% from current levels.

3. American National Bankshares Inc. (AMNB): Operates as the bank holding company for American National Bank and Trust Company that provides various commercial, mortgage, and consumer banking products and services to individuals and businesses in Virginia and North Carolina. Market cap at $178.84M, most recent closing price at $23.06. Dividend yield at 4.03%, payout ratio at 49.10%. Diluted TTM earnings per share at 1.87, and a MRQ book value per share value at 19.8, implies a Graham Number fair value = sqrt(22.5*1.87*19.8) = $28.86. Based on the stock's price at $23.25, this implies a potential upside of 24.14% from current levels.

4. Citizens & Northern Corp. (CZNC): Operates as the holding for Citizens & Northern Bank, which provides various banking and mortgage products and services to individual and corporate customers in north central Pennsylvania and southern New York. Market cap at $223.63M, most recent closing price at $18.73. Dividend yield at 4.81%, payout ratio at 32.74%. Diluted TTM earnings per share at 1.92, and a MRQ book value per share value at 14.05, implies a Graham Number fair value = sqrt(22.5*1.92*14.05) = $24.64. Based on the stock's price at $19.92, this implies a potential upside of 23.68% from current levels.

5. GAIN Capital Holdings, Inc. (GCAP): Operates as an online provider of retail and institutional foreign exchange trading and related services. (DISCLOSURE: GAIN Capital has a non-controlling interest in the parent company of Kapitall) Market cap at $158.28M, most recent closing price at $4.51. Dividend yield at 4.42%, payout ratio at 26.82%. Diluted TTM earnings per share at 0.33, and a MRQ book value per share value at 4.71, implies a Graham Number fair value = sqrt(22.5*0.33*4.71) = $5.91. Based on the stock's price at $4.84, this implies a potential upside of 22.18% from current levels.

6. Merchants Bancshares Inc. (MBVT): Operates as the bank holding company for The Merchants Bank that provides commercial banking products and services in Vermont. Market cap at $169.35M, most recent closing price at $27.68. Dividend yield at 4.13%, payout ratio at 43.75%. Diluted TTM earnings per share at 2.43, and a MRQ book value per share value at 17.97, implies a Graham Number fair value = sqrt(22.5*2.43*17.97) = $31.35. Based on the stock's price at $27.08, this implies a potential upside of 15.75% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 6 High Dividend Yield Stocks Undervalued By The Graham Number