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Boost Your Portfolio With These 4 High Earnings Yield Stocks
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If you are not certain whether to invest your money in stocks or bonds, one important metric that can show you the right direction is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This financial ratio can be successfully utilized for pinpointing undervalued stocks. Also, this ratio is very handy for comparing stocks with the market or fixed income securities.
Earnings yield can be calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with high earnings yield should generate higher returns.
This ratio can be used for comparing the performance of the market with the 10-year Treasury yield. When the yield of the market index exceeds the 10-year Treasury yield, stocks can be considered undervalued in comparison to bonds. This implies that investing in the stock market is a better option for a value investor.
However, while T-bills are free of risks, investing in stocks always involves some inherent risks. Hence, it would be wise to add a risk premium to the Treasury yield while comparing with the earnings yield of a stock or the broader market.
The Winning Strategy
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Here are four of the 21 stocks that made it through the screen:
Memphis, TN-based, International Paper Company (IP - Free Report) operates as a paper and packaging company. It has a Zacks Rank #2 and an expected EPS growth rate of 9.5% for the next 3–5 years.
Madrid, Spain-based Banco Bilbao Viscaya Argentaria S.A. (BBVA - Free Report) is engaged in a wide variety of banking, financial and related activities. It has a Zacks Rank #2 and an expected EPS growth rate of 8.3% for the next 3–5 years.
Tucker, GA-based GMS Inc. (GMS - Free Report) is a distributor of wallboard and suspended ceilings systems. It has a Zacks Rank #2 and an expected EPS growth rate of 7% for the next 3–5 years.
Arlington, TX-based D.R. Horton, Inc. (DHI - Free Report) is engaged in the construction and sale of high-quality homes through its diverse brands. It has a Zacks Rank #2 and an expected EPS growth rate of 10% for the next 3–5 years.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Boost Your Portfolio With These 4 High Earnings Yield Stocks
If you are not certain whether to invest your money in stocks or bonds, one important metric that can show you the right direction is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This financial ratio can be successfully utilized for pinpointing undervalued stocks. Also, this ratio is very handy for comparing stocks with the market or fixed income securities.
Earnings yield can be calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with high earnings yield should generate higher returns.
This ratio can be used for comparing the performance of the market with the 10-year Treasury yield. When the yield of the market index exceeds the 10-year Treasury yield, stocks can be considered undervalued in comparison to bonds. This implies that investing in the stock market is a better option for a value investor.
However, while T-bills are free of risks, investing in stocks always involves some inherent risks. Hence, it would be wise to add a risk premium to the Treasury yield while comparing with the earnings yield of a stock or the broader market.
The Winning Strategy
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are four of the 21 stocks that made it through the screen:
Memphis, TN-based, International Paper Company (IP - Free Report) operates as a paper and packaging company. It has a Zacks Rank #2 and an expected EPS growth rate of 9.5% for the next 3–5 years.
Madrid, Spain-based Banco Bilbao Viscaya Argentaria S.A. (BBVA - Free Report) is engaged in a wide variety of banking, financial and related activities. It has a Zacks Rank #2 and an expected EPS growth rate of 8.3% for the next 3–5 years.
Tucker, GA-based GMS Inc. (GMS - Free Report) is a distributor of wallboard and suspended ceilings systems. It has a Zacks Rank #2 and an expected EPS growth rate of 7% for the next 3–5 years.
Arlington, TX-based D.R. Horton, Inc. (DHI - Free Report) is engaged in the construction and sale of high-quality homes through its diverse brands. It has a Zacks Rank #2 and an expected EPS growth rate of 10% for the next 3–5 years.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »