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5 High Earnings Yield Value Stocks to Power Your Portfolio
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In the realm of investment strategies, value investing is a time-tested approach that involves identifying stocks trading below their intrinsic value. This method is rooted in the belief that the market often misjudges stock prices in the short term.
Value investing adopts a long-term perspective, evaluating companies based on fundamental strength, earnings potential and financials to determine their intrinsic value. The goal is to profit by investing in stocks that seem undervalued. The investment eventually yields substantial returns as the stock price aligns with its intrinsic value, reflecting the actual fundamentals.
While the P/E ratio is a popular metric for selecting undervalued stocks with significant upside potential, another useful ratio for value investors is earnings yield. This metric helps investors in discerning whether a stock is a hidden gem or a potential financial pitfall.
Investors can explore high earnings yield stocks like SkyWest (SKY - Free Report) , Xerox Holdings Corporation (XRX - Free Report) , Pilgrim's Pride Corporation (PPC - Free Report) , Sunoco LP (SUN - Free Report) and TheTravelers Companies (TRV - Free Report) to secure attractive long-term rewards.
Calculated as annual earnings per share (EPS) divided by market price, this percentage metric gauges the anticipated yield from earnings for each invested dollar in a stock. When comparing similar stocks, those with higher earnings yield are perceived as undervalued, while lower earnings yield indicates overpricing.
Although earnings yield is essentially the reciprocal of the P/E ratio, it provides additional insight by facilitating comparisons with fixed-income securities. Investors often juxtapose a stock's earnings yield with prevailing interest rates, such as the current 10-year Treasury yield, to assess its return on investment relative to nearly risk-free returns.
If a stock's yield is lower than the 10-year Treasury yield, it is deemed overvalued compared to bonds. Conversely, a higher stock yield suggests undervaluation, making investing in the stock market a preferable choice for a value investor in such a scenario.
The Winning Strategy
We have set an 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 we discuss five of the 23 stocks that qualified the screening:
SkyWest, headquartered in Utah, operates a regional airline in the United States. Its fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. SKYW repurchased 10.6 million shares in 2023. In February 2024, SkyWest announced the acquisition of a 25% stake in Contour Airlines. The deal will enhance its standing in the Part 135 charter market, bolstering its operational capabilities and market reach.
The Zacks Consensus Estimate for SKYW’s 2024 sales and earnings implies year-over-year growth of around 13% and 730%, respectively. Estimates for 2024 and 2025 EPS have moved up by 81 cents and $1.11, respectively, over the past 30 days. SkyWest currently sports a Zacks Rank #1 and has a Value Score of A.
Xerox Holdings is engaged in the document management solutions business. The company’s post-sale-driven model yields substantial recurring revenues, supporting robust cash flows and fueling strategic investments and market expansion. The acquisition of Advanced UK has enhanced vertical integration and strengthened its UK presence. XRX’s "Project Own It" initiative is boosting the firm’s productivity, efficiency, and cost reduction.
The Zacks Consensus Estimate for XRX’s 2024 and 2025 earnings implies year-over-year growth of around 25% and 9%, respectively. Estimates for 2024 and 2025 EPS have moved up by 21 cents and 20 cents, respectively, over the past 60 days. Xerox currently sports a Zacks Rank #1 and has a Value Score of A.
Pilgrim's Pride processes, produces, markets and distributes frozen, fresh, and value-added chicken products. Its focus on key customers is a pathway for refining its portfolio and creating competitive advantages. The company has been augmenting the marketing support of its brands as they expand and enter new regions. The pursuit of M&A opportunities and frequent supply-chain enhancements is bolstering efficiency and reducing costs.
The Zacks Consensus Estimate for PPC’s 2024 and 2025 earnings implies year-over-year growth of around 76% and 3%, respectively. Estimates for 2024 EPS have moved up by 12 cents over the past 60 days. The company surpassed the earnings estimates in the trailing four quarters. PPC currently sports a Zacks Rank #1 and has a Value Score of A.
Sunoco is a leading wholesale motor fuel distributor in the United States, distributing over 10 fuel brands through long-term contracts with 10,000+ convenience stores. The impending acquisition of NuStar Energy will diversify Sunoco’s business portfolio, adding stability and vertical integration benefits. Stable cash flows, diversified operations and effective cost management of the firm are the other tailwinds.
The Zacks Consensus Estimate for SUN’s 2024 earnings implies year-over-year growth of around 36%. Estimates for 2024 and 2025 EPS have moved up by 60 cents and 45 cents, respectively, over the past 30 days. Sunoco currently sports a Zacks Rank #1 and has a Value Score of B.
The Travelers Companies offers diverse property and casualty insurance and surety products and services to businesses, organizations, and individuals across the United States. Strong renewal rate change, retention and an increase in new business supported by a compelling portfolio and a solid capital position poise TRV well for growth.Consistent efforts to return excess capital to shareholders via dividend increases and share buybacks are praiseworthy.
The Zacks Consensus Estimate for TRV’s 2024 earnings and sales implies year-over-year growth of around 35% and 12%, respectively. The consensus mark for 2025 EPS and sales points to an uptick of another 14% and 8% year-over-year growth, respectively. The Travelers Companies currently carries a Zacks Rank #2 and has a Value Score of A.
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 Value Stocks to Power Your Portfolio
In the realm of investment strategies, value investing is a time-tested approach that involves identifying stocks trading below their intrinsic value. This method is rooted in the belief that the market often misjudges stock prices in the short term.
Value investing adopts a long-term perspective, evaluating companies based on fundamental strength, earnings potential and financials to determine their intrinsic value. The goal is to profit by investing in stocks that seem undervalued. The investment eventually yields substantial returns as the stock price aligns with its intrinsic value, reflecting the actual fundamentals.
While the P/E ratio is a popular metric for selecting undervalued stocks with significant upside potential, another useful ratio for value investors is earnings yield. This metric helps investors in discerning whether a stock is a hidden gem or a potential financial pitfall.
Investors can explore high earnings yield stocks like SkyWest (SKY - Free Report) , Xerox Holdings Corporation (XRX - Free Report) , Pilgrim's Pride Corporation (PPC - Free Report) , Sunoco LP (SUN - Free Report) and The Travelers Companies (TRV - Free Report) to secure attractive long-term rewards.
Calculated as annual earnings per share (EPS) divided by market price, this percentage metric gauges the anticipated yield from earnings for each invested dollar in a stock. When comparing similar stocks, those with higher earnings yield are perceived as undervalued, while lower earnings yield indicates overpricing.
Although earnings yield is essentially the reciprocal of the P/E ratio, it provides additional insight by facilitating comparisons with fixed-income securities. Investors often juxtapose a stock's earnings yield with prevailing interest rates, such as the current 10-year Treasury yield, to assess its return on investment relative to nearly risk-free returns.
If a stock's yield is lower than the 10-year Treasury yield, it is deemed overvalued compared to bonds. Conversely, a higher stock yield suggests undervaluation, making investing in the stock market a preferable choice for a value investor in such a scenario.
The Winning Strategy
We have set an 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.
Our Picks
Here we discuss five of the 23 stocks that qualified the screening:
SkyWest, headquartered in Utah, operates a regional airline in the United States. Its fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. SKYW repurchased 10.6 million shares in 2023. In February 2024, SkyWest announced the acquisition of a 25% stake in Contour Airlines. The deal will enhance its standing in the Part 135 charter market, bolstering its operational capabilities and market reach.
The Zacks Consensus Estimate for SKYW’s 2024 sales and earnings implies year-over-year growth of around 13% and 730%, respectively. Estimates for 2024 and 2025 EPS have moved up by 81 cents and $1.11, respectively, over the past 30 days. SkyWest currently sports a Zacks Rank #1 and has a Value Score of A.
Xerox Holdings is engaged in the document management solutions business. The company’s post-sale-driven model yields substantial recurring revenues, supporting robust cash flows and fueling strategic investments and market expansion. The acquisition of Advanced UK has enhanced vertical integration and strengthened its UK presence. XRX’s "Project Own It" initiative is boosting the firm’s productivity, efficiency, and cost reduction.
The Zacks Consensus Estimate for XRX’s 2024 and 2025 earnings implies year-over-year growth of around 25% and 9%, respectively. Estimates for 2024 and 2025 EPS have moved up by 21 cents and 20 cents, respectively, over the past 60 days. Xerox currently sports a Zacks Rank #1 and has a Value Score of A.
Pilgrim's Pride processes, produces, markets and distributes frozen, fresh, and value-added chicken products. Its focus on key customers is a pathway for refining its portfolio and creating competitive advantages. The company has been augmenting the marketing support of its brands as they expand and enter new regions. The pursuit of M&A opportunities and frequent supply-chain enhancements is bolstering efficiency and reducing costs.
The Zacks Consensus Estimate for PPC’s 2024 and 2025 earnings implies year-over-year growth of around 76% and 3%, respectively. Estimates for 2024 EPS have moved up by 12 cents over the past 60 days. The company surpassed the earnings estimates in the trailing four quarters. PPC currently sports a Zacks Rank #1 and has a Value Score of A.
Sunoco is a leading wholesale motor fuel distributor in the United States, distributing over 10 fuel brands through long-term contracts with 10,000+ convenience stores. The impending acquisition of NuStar Energy will diversify Sunoco’s business portfolio, adding stability and vertical integration benefits. Stable cash flows, diversified operations and effective cost management of the firm are the other tailwinds.
The Zacks Consensus Estimate for SUN’s 2024 earnings implies year-over-year growth of around 36%. Estimates for 2024 and 2025 EPS have moved up by 60 cents and 45 cents, respectively, over the past 30 days. Sunoco currently sports a Zacks Rank #1 and has a Value Score of B.
The Travelers Companies offers diverse property and casualty insurance and surety products and services to businesses, organizations, and individuals across the United States. Strong renewal rate change, retention and an increase in new business supported by a compelling portfolio and a solid capital position poise TRV well for growth.Consistent efforts to return excess capital to shareholders via dividend increases and share buybacks are praiseworthy.
The Zacks Consensus Estimate for TRV’s 2024 earnings and sales implies year-over-year growth of around 35% and 12%, respectively. The consensus mark for 2025 EPS and sales points to an uptick of another 14% and 8% year-over-year growth, respectively. The Travelers Companies currently carries a Zacks Rank #2 and has a Value Score of A.
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.