Great investors like Warren Buffett have proved that little by little, the dividends can grow into a pile of cash and greatly improve an investor's returns over time. But of course, dividends is not everything, we would like to see healthy fundamentals in any stock that we buy. For today's screen, there will also be additional criteria for it to be unloved, which could be quite beneficial to investors.
Now, for the criterion of the screen today:
1. Dividend Yield >3%
As the screen today aims to find stocks paying a high dividend, this is quite obviously a need. But other than that, it can also be an indicator that the company's business is steadily growing and it has money to pay investors.
2. Healthy Fundamentals
- ROE >15%
- Current Ratio >1.5
The ROE (Return On Equity) is a measure of a company's profitability by revealing how much profit a company generates with the money shareholders have invested. A high ROE can ensure that a company's management is making good use of shareholders' investments and not wasting it away. The current ratio is a company's assets divided by its liabilities. Therefore, any current ratio below 1 would mean that a company has more liabilities than assets, which is quite dangerous, in my opinion, especially for smaller companies.
3. Unloved
- P/B <2
- Float Short >10%
The Price/Book (P/B) ratio is a comparison of a stock's market value to its book value. (The formula for book value is tangible assets-intangible assets-liabilities). A low P/B ratio could mean that the stock is undervalued. The criteria that a stock's short float has to be more than 10% makes it evident that the products of this screen, have to be really unloved, with much of their float shorted by investors. But this could actually be beneficial to investors, as any short-term good news like quarterly earnings could cause a short squeeze which could push a stock's price higher.
Keeping all the criteria in mind, here are the 3 stocks.
1. Eaton Corp. (ETN)
Snapshot:
Price (24.10.2012) | $44.99 |
Market Cap | 15.19B |
Income (2011) | 1.42B (P/E: 10.76) |
Book Value Per Share | $23.51 (P/B: 1.91) |
Float Short | 11.73% |
ROE | 37.57% |
Current Ratio | 1.66 |
Dividend | $1.52 (3.38%) |
(Click to enlarge)
Sector: Industrial Goods
Industry: Industrial Electrical Equipment
Country: USA
Eaton Corporation operates as a diversified power management company worldwide. The company provides electrical components and systems, hydraulics components, systems, and services for industrial and mobile equipment; aerospace fuel, hydraulics, and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems.
It supplies its goods to many markets such as the industrial, institutional, governmental, utility and power generation markets; manufacturers of commercial and military aircraft and related after-market customers; and original equipment manufacturers of SUVs, CUVs, as well as heavy, medium, and light-duty trucks.
The company markets its products directly, as well as through distributors, resellers, manufacturers' representatives, and other channels. Eaton Corporation sells its products to customers in approximately 150 countries. The company was founded in 1916 and is headquartered in Cleveland, Ohio.
2. Guess Inc. (GES)
Snapshot:
Price (24.10.2012) | $24.58 |
Market Cap | 2.09B |
Income (2011) | 230.00M (P/E: 9.68) |
Book Value Per Share | $12.33 (P/B: 1.99) |
Float Short | 10.38% |
ROE | 20.70% |
Current Ratio | 2.80 |
Dividend | $0.80 (3.25%) |
(Click to enlarge)
Sector: Services
Industry: Apparel Stores
Country: USA
Guess Inc. designs, markets, distributes, and licenses lifestyle collections of contemporary apparel and accessories for men, women, and children. The company's clothing collection includes jeans, pants, skirts, dresses, shorts and many other types of apparel.
Guess, Inc. also grants licenses to manufacture and distribute a range of products that complement its apparel lines, including eyewear, watches, handbags, swimwear, fragrance, jewelry, and other fashion accessories.
The company markets its products under various trademarks, including GUESS, Guess, Triangle Design, MARCIANO, Question Mark, GUESS Kids, G by Guess and many other names.
As of January 28, 2012, the company directly operated 504 stores in the United States and Canada; 251 stores outside of the United States and Canada; an additional 230 smaller-sized concessions in Asia and Europe. Its international licensees and distributors operated 804 stores outside the United States and Canada; and 119 smaller-sized licensee operated concessions in Asia. The company was founded in 1981 and is headquartered in Los Angeles, California
3. Kronos Worldwide (KRO)
Snapshot:
Price (24.10.2012) | $13.88 |
Market Cap | 1.61B |
Income (2011) | 373.10M (P/E: 4.31) |
Book Value Per Share | $9.09 (P/B: 1.53) |
Float Short | 28.96% |
ROE | 39.24% |
Current Ratio | 3.03 |
Dividend | $0.60 (4.32%) |
(Click to enlarge)
Sector: Basic Materials
Industry: Specialty Chemicals
Country: USA
Kronos Worldwide, Inc. engages in the production and marketing of titanium dioxide pigments under the Kronos brand name primarily in North America and Europe.
It produces titanium dioxide pigments for coatings, plastics, papers fibers, and ceramics, as well as for various specialty products, including inks, food, and cosmetics.
The company also offers ilmenite, a raw material used directly as a feedstock by sulfate-process titanium dioxide pigment plants; iron-based chemicals, used as treatment and conditioning agents for industrial effluents and municipal wastewater, as well as in the manufacture of iron pigments, cement, and other agricultural products.
Its titanium oxychloride is also used in the formulation of pearlescent pigments and production of electroceramic capacitors for cell phones and other electronic devices.
Kronos sells its products through distributors and agents to paint, plastics, decorative laminate, and paper manufacturers. The company was founded in 1989 and is headquartered in Dallas, Texas. Kronos is a subsidiary of Valhi, Inc.
Please still do your due diligence before investing and use this list only as a starting point for your research.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
