When it comes to investments, timing is everything. Everyone wants to get in on a stock when the price has taken a dip and is offered below the estimated future worth. Today, we have a short list of mid-cap dividend stocks that analysts believe are trading below market value. All these companies offer moderate to high yields and have been recently labeled by industry analysts as 'Buy' or 'Strong Buy.'
The Price/Book Value Ratio (P/BV ratio) is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a P/BV 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.
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 the more the firm is relying on debt to finance its assets.
We first looked for mid-cap dividend stocks. Next, we screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then screened for businesses that are undervalued (P/BV<1)(forward P/E<10). We did not screen out any sectors.
Do you think these mid-cap stocks should be priced higher? Use our screened list as a starting point for your own analysis.
1) AEGON NV (AEG)
AEGON NV has a Dividend Yield of 3.12%, a Payout Ratio of 41.88%, Analysts' Rating of 2.00, a Price/Book Value Ratio of 0.24, and a Forward Price/Earnings Ratio of 4.78. The short interest was 0.06% as of 07/26/2012. AEGON is a holding company that, through its member companies that are collectively referred to as the AEGON Group, operates as a life insurance and pension company. Its businesses focus on life insurance, pensions, savings and investment products. The AEGON Group is also active in accident, supplemental health, general insurance and some limited banking activities.
2) Assured Guaranty Ltd. (AGO)
|Industry:||Surety & Title Insurance|
Assured Guaranty Ltd. has a Dividend Yield of 3.12%, a Payout Ratio of 27.06%, Analysts' Rating of 1.80, a Price/Book Value Ratio of 0.50, and a Forward Price/Earnings Ratio of 4.24. The short interest was 1.28% as of 07/26/2012. Assured Guaranty Ltd., through its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets primarily in the United States, Europe, and Australia. It offers insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments, including scheduled interest and principal payments. The company insures various securities, including tax-exempt and taxable obligations issued by the United States state or municipal governmental authorities, and utility districts or facilities; notes or bonds issued to finance international infrastructure projects; and asset-backed securities issued by special purpose entities.
3) First Niagara Financial Group Inc. (FNFG)
|Industry:||Savings & Loans|
First Niagara Financial Group Inc. has a Dividend Yield of 4.36%, a Payout Ratio of 92.30%, Analysts' Rating of 2.30, a Price/Book Value Ratio of 0.53, and a Forward Price/Earnings Ratio of 8.74. The short interest was 2.05% as of 07/26/2012. First Niagara Financial Group, Inc. operates as the holding company for First Niagara Bank, N.A. that provides retail and commercial banking, and other financial services to individuals, families, and businesses.
*Company profiles were sourced from Yahoo Finance. Financial data was sourced from Finviz.