We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 High Earnings Yield Stocks to Strengthen Your Portfolio
Read MoreHide Full Article
If you are not sure whether to invest your money in bonds or stocks, an important parameter, which can show you the right direction, is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This ratio can be effectively used for figuring out undervalued stocks. Also, this ratio is 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 provide higher returns.
This ratio is very useful 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 said to be undervalued in comparison to bonds. This implies that investing in the stock market is a better choice for a value investor.
However, while T-bills are free of risks, investing in stocks always carries some inherent risks. Hence, it will 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 18 stocks that made it through the screen:
Based in Newark, DE, Sallie Mae (SLM - Free Report) , formally known as SLM Corporation, is a bellwether in education finance in the United States, with presence in the market for over 40 years. It has a Zacks Rank #2 and an expected EPS growth rate of 19.5% for the next 3-5 years.
Based in Chicago, United Continental Holdings, Inc. (UAL - Free Report) is the holding company for both United Airlines and Continental Airlines. United Continental Holdings was formed by the merger of Continental Airlines with UAL Corp. on Oct 1, 2010. The merger created the world’s largest airline. It has a Zacks Rank #2 and an expected EPS growth rate of 20.1% for the next 3-5 years.
Summit, NJ-based Celgene Corporation is a global biopharmaceutical company engaged in the discovery, development and commercialization of innovative therapies. It has a Zacks Rank #1 and an expected EPS growth rate of 22% for the next 3-5 years.
San Diego, CA-based Ligand Pharmaceuticals Incorporated (LGND - Free Report) discovers, develops and markets new drugs that address critical unmet medical needs of patients. It has a Zacks Rank #2 and an expected EPS growth rate of 20% 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.
Image: Bigstock
4 High Earnings Yield Stocks to Strengthen Your Portfolio
If you are not sure whether to invest your money in bonds or stocks, an important parameter, which can show you the right direction, is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This ratio can be effectively used for figuring out undervalued stocks. Also, this ratio is 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 provide higher returns.
This ratio is very useful 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 said to be undervalued in comparison to bonds. This implies that investing in the stock market is a better choice for a value investor.
However, while T-bills are free of risks, investing in stocks always carries some inherent risks. Hence, it will 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 18 stocks that made it through the screen:
Based in Newark, DE, Sallie Mae (SLM - Free Report) , formally known as SLM Corporation, is a bellwether in education finance in the United States, with presence in the market for over 40 years. It has a Zacks Rank #2 and an expected EPS growth rate of 19.5% for the next 3-5 years.
Based in Chicago, United Continental Holdings, Inc. (UAL - Free Report) is the holding company for both United Airlines and Continental Airlines. United Continental Holdings was formed by the merger of Continental Airlines with UAL Corp. on Oct 1, 2010. The merger created the world’s largest airline. It has a Zacks Rank #2 and an expected EPS growth rate of 20.1% for the next 3-5 years.
Summit, NJ-based Celgene Corporation is a global biopharmaceutical company engaged in the discovery, development and commercialization of innovative therapies. It has a Zacks Rank #1 and an expected EPS growth rate of 22% for the next 3-5 years.
San Diego, CA-based Ligand Pharmaceuticals Incorporated (LGND - Free Report) discovers, develops and markets new drugs that address critical unmet medical needs of patients. It has a Zacks Rank #2 and an expected EPS growth rate of 20% 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.