Dividends4Life: Undervalued Dividend Stocks

Undervalued Dividend Stocks

Posted by D4L | Friday, July 06, 2012 | | 0 comments »

Do you prefer stocks that pay dividend income and offer the opportunity for price increases? With this idea in mind, we ran a screen on dividend stocks for those that appear undervalued. We began by screening dividend stocks (those paying dividend yields above 2% and sustainable payout ratios below 50%) for those that appear undervalued relative to earnings growth, with PEG below 1. We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the “godfather of value investing” Benjamin Graham.

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) The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued. Use this list as a starting point for your own analysis: 1. A. Schulman, Inc. (SHLM), 2. AFLAC Inc. (AFL), 3. Cascade Corp. (CASC), 4. ManpowerGroup (MAN) and 5. Ameriprise Financial Inc. (AMP).

Source: Kapitall

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