Dividends4Life: Undervalued Dividend Stocks Using The Graham Number

Do you prefer stocks that pay dividends you can rely on? We ran a screen with this idea in mind. We began by screening the S&P 500 for dividend stocks: those paying dividend yields above 2% and sustainable payout ratios below 50%. Then we screened that universe for those that 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: 1. ConocoPhillips (COP), 2. L-3 Communications Holdings Inc. (LLL), 3. Northrop Grumman Corporation (NOC), 4. Safeway Inc. (SWY), 5. Molson Coors Brewing Company (TAP) and . The Washington Post Company (WPO).

Source: Kapitall Wire

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