3 High Yield Dividend Stocks Trading Below Fair Value

Includes: AM-OLD, GCAP, TGS
by: ZetaKap

Everyone appreciates finding a bargain, especially when you have done the research and know that your purchase is worth more than you paid. Today we screened for dividends that offer moderate to high yields that analysts have noted as undervalued. This small but compelling list were rated as 'Buy' recently.

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.

The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a company's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the company is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share

The Price/Sales ratio is a price-multiple valuation metric used to help identify if a company is cheap by its 12-month trailing sales numbers. In the most basic terms, it lets an investor know how much the investment community is willing to pay for every dollar's worth of sales. A company with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollar's worth of a company's sales. On the other hand, a company is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share

We first looked for dividend stocks. We then looked for companies with estimated high-growth, with 1-year projected EPS growth above 25%. We then looked for companies that are trading at low price-multiple valuations (P/CFO<10)(P/S<1). We did not screen out any market caps or sectors.

Do you think these stocks have strong operations? Use our screened list as a starting point for your own analysis.

1) GAIN Capital Holdings, Inc. (NYSE:GCAP)

Sector: Financial
Industry: Investment Brokerage - National
Market Cap: $155.83M
Beta: -

GAIN Capital Holdings, Inc. has a Dividend Yield of 4.48%, a Payout Ratio of 26.82%, a 1-Year Projected Earnings Per Share Growth Rate of 175.00%, a Price/Cash Flow Ratio of 0.44, and a Price/Sales Ratio of 0.89. The short interest was 2.53% as of July 24, 2012. GAIN Capital Holdings, Inc., through its subsidiaries, provides online trading services worldwide. It specializes in over-the-counter (OTC) markets, including spot foreign exchange and precious metals, as well as contracts-for-difference. The company services retail investors through its FOREX.

2) Transportadora de Gas del Sur S.A. (NYSE:TGS)

Sector: Utilities
Industry: Gas Utilities
Market Cap: $271.72M
Beta: 1.13

Transportadora de Gas del Sur S.A. has a Dividend Yield of 88.03%, a 1-Year Projected Earnings Per Share Growth Rate of 100.00%, a Price/Cash Flow Ratio of 2.04, and a Price/Sales Ratio of 0.63. The short interest was 0.28% as of July 24, 2012. Transportadora de Gas del Sur S.A. engages in the transportation of natural gas primarily in Latin America.

The company transports its natural gas to distribution companies, industries, traders, producers, and power plant operators, as well as for natural gas end users through operating approximately 8627 kilometers pipeline system. It is also involved in the production and commercialization of natural gas liquids, including ethane, propane, butane, and natural gasoline in Argentina and internationally.

3) American Greetings Corporation (NYSE:AM-OLD)

Sector: Services
Industry: Specialty Retail, Other
Market Cap: $439.19M
Beta: 1.73

American Greetings Corp. has a Dividend Yield of 4.62%, a Payout Ratio of 70.10%, a 1-Year Projected Earnings Per Share Growth Rate of 50.89%, a Price/Cash Flow Ratio of 7.30, and a Price/Sales Ratio of 0.26. The short interest was 43.67% as of July 24, 2012. American Greetings Corporation, together with its subsidiaries, engages in the design, manufacture, and sale of greeting cards and other social expression products in the United States and internationally.

The company provides greeting cards, gift packaging products, party goods, stationery, giftware, and custom display fixtures. It also distributes social expression products, including electronic greetings; and a range of graphics and digital services and products through various electronic channels, including websites, internet portals, instant messaging services, and electronic mobile devices. In addition, the company creates and licenses its intellectual properties, such as the Care Bears and Strawberry Shortcake characters.

*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.

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