Dividends4Life: High Yield Dividend Stocks Undervalued

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High Yield Dividend Stocks Undervalued

Posted by D4L | Tuesday, May 22, 2012 | | 0 comments »

Do you consider yourself a value investor? For value ideas, we ran a screen that you may be interested in. We began by screening for high-yield dividend stocks, with yields between 2%-7%, for those that also appear undervalued to earnings growth, with PEG below 1. We then screened these names to find those that appear undervalued to the Graham Number. The Graham Number was created by the “godfather of value investing” and Warren Buffett’s mentor, Benjamin Graham as a calculation for a stock’s maximum fair value. 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)

We also considered the amount of net earnings a company distributes in the form of dividends to their shareholders. Lower payouts are an indicator a company is keeping earnings. High payouts indicate the company uses earnings for dividends. A payout ratio indicates a firm’s desire to share the company’s earnings with investors. If the payout ratio is low, it typically signals the company is reinvesting earnings to spur further growth. However payout ratios that are too high can be unstable. Payout ratio = dividends per share/earnings per share

Source: Kapitall

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