3 Very Profitable High Dividend Yield Stocks Undervalued By Levered Free Cash Flows

Includes: ENIA, SPOK, TEO
by: Kapitall

Interested in stocks paying significant dividends? For ideas on how to start your search, we ran a screen you might be interested in.

We screened for high dividend yield stocks paying dividend yields above 4% and sustainable payout ratios below 50%. We then screened for those that appear undervalued relative to levered free cash flow/enterprise value.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. Companies with high ratios of levered free cash flow/enterprise value may be undervalued by the market.

We also screened for stocks with impressive profitability, beating their industry peers on gross, operating, and pretax margins.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

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

List sorted by dividend yield.

1. Telecom Argentina S A (NYSE:TEO): Provides fixed-line telecommunication services and other related services in Argentina. Dividend yield at 7.65%. Payout ratio at 37.44%. TTM gross margin at 58.84% vs. industry average at 49.08%. TTM operating margin at 22.41% vs. industry average at 13.25%. TTM pretax margin at 20.46% vs. industry average at 10.24%. Levered free cash flow at $500.26M vs. enterprise value at $3.78B (implies a LFCF/EV ratio at 13.23%).

2. USA Mobility, Inc. (USMO): Provides wireless communications solutions to the healthcare, government, enterprise, and emergency response sectors in the United States. Dividend yield at 7.04%. Payout ratio at 40.33%. TTM gross margin at 66.92% vs. industry average at 60.79%. TTM operating margin at 28.7% vs. industry average at 21.39%. TTM pretax margin at 26.51% vs. industry average at 16.54%. Levered free cash flow at $51.33M vs. enterprise value at $303.11M (implies a LFCF/EV ratio at 16.93%).

3. Enersis S.A. (ENI): Engages in the generation, transmission, and distribution of electricity in Chile, Argentina, Brazil, Colombia, and Peru. Dividend yield at 4.31%. Payout ratio at 38.79%. TTM gross margin at 30.49% vs. industry average at 26.96%. TTM operating margin at 24.23% vs. industry average at 18.47%. TTM pretax margin at 21.16% vs. industry average at 14.2%. Levered free cash flow at $2.03B vs. enterprise value at $17.38B (implies a LFCF/EV ratio at 11.68%).

*LFCF/EV 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.

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