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5 High Earnings Yield Stocks to Scoop Up for Solid Gains
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The earnings potential of a stock is an important consideration while making investment decisions. This makes the Earnings Yield ratio a handy tool for stock selection.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. It is the inverse of the P/E ratio. While comparing similar stocks, the one with higher earnings yield has the potential to provide comparatively greater returns.
Earnings yield has an edge over P/E ratio as it can be used to compare a stock with not just other stocks but also with fixed income securities. This metric is often used to compare the performance of a market index with the 10-year Treasury yield.
For instance, if the yield of the market index is more than the 10-year Treasury, stocks can be considered as undervalued than bonds. In such a case, investing in the stock market would be a better option for a value investor.
However, in view of the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the overall market.
Screening Parameters
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 of generating 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 five of the 46 stocks that made it through the screen:
Sonic Automotive, Inc. (SAH - Free Report) : Sonic Automotive is one of the leading automotive retailers in the United States. In addition to selling new and used cars as well as light trucks, the company offers warranties, service contracts, vehicle financing, along with insurance. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 11.3%.
SpartanNash Co. (SPTN - Free Report) : SpartanNash is a food distributor serving military commissaries and exchanges in the United States. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 82.7%.
Big Lots, Inc. (BIG - Free Report) : Based in Columbus, OH, Big Lots is a broad-line closeout retailer in the United States. The company offers products under various merchandising categories, which include Food, Consumables, Furniture, Seasonal, Soft Home, Hard Home, Electronics and Toys & Accessories. The firm presently carries a Zacks Rank #1 and its fiscal 2021 earnings estimates indicate year-over-year growth of 80.9%.
Asbury Automotive Group (ABG - Free Report) : One of the largest automotive retailers, Asbury offers an extensive range of automotive products and services, including new and used vehicles and related financing and insurance, vehicle maintenance, as well as repair services. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 5.5%.
Delek Logistics Partners, LP. (DKL - Free Report) : This Tennessee-based master limited partnership owns, operates, acquires, and constructs crude oil as well as refined product logistics and marketing assets. The firm presently carries a Zacks Rank #2 and its 2020 earnings estimates indicate year-over-year growth of 57.5%.
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.
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5 High Earnings Yield Stocks to Scoop Up for Solid Gains
The earnings potential of a stock is an important consideration while making investment decisions. This makes the Earnings Yield ratio a handy tool for stock selection.
Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. It is the inverse of the P/E ratio. While comparing similar stocks, the one with higher earnings yield has the potential to provide comparatively greater returns.
Earnings yield has an edge over P/E ratio as it can be used to compare a stock with not just other stocks but also with fixed income securities. This metric is often used to compare the performance of a market index with the 10-year Treasury yield.
For instance, if the yield of the market index is more than the 10-year Treasury, stocks can be considered as undervalued than bonds. In such a case, investing in the stock market would be a better option for a value investor.
However, in view of the risk-free nature of T-bills, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the overall market.
Screening Parameters
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 of generating 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.
Our Picks
Here are five of the 46 stocks that made it through the screen:
Sonic Automotive, Inc. (SAH - Free Report) : Sonic Automotive is one of the leading automotive retailers in the United States. In addition to selling new and used cars as well as light trucks, the company offers warranties, service contracts, vehicle financing, along with insurance. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 11.3%.
SpartanNash Co. (SPTN - Free Report) : SpartanNash is a food distributor serving military commissaries and exchanges in the United States. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 82.7%.
Big Lots, Inc. (BIG - Free Report) : Based in Columbus, OH, Big Lots is a broad-line closeout retailer in the United States. The company offers products under various merchandising categories, which include Food, Consumables, Furniture, Seasonal, Soft Home, Hard Home, Electronics and Toys & Accessories. The firm presently carries a Zacks Rank #1 and its fiscal 2021 earnings estimates indicate year-over-year growth of 80.9%.
Asbury Automotive Group (ABG - Free Report) : One of the largest automotive retailers, Asbury offers an extensive range of automotive products and services, including new and used vehicles and related financing and insurance, vehicle maintenance, as well as repair services. The firm presently carries a Zacks Rank #1 and its 2020 earnings estimates indicate year-over-year growth of 5.5%.
Delek Logistics Partners, LP. (DKL - Free Report) : This Tennessee-based master limited partnership owns, operates, acquires, and constructs crude oil as well as refined product logistics and marketing assets. The firm presently carries a Zacks Rank #2 and its 2020 earnings estimates indicate year-over-year growth of 57.5%.
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