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Pick These 4 High Earnings Yield Stocks Right Away
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Earnings Yield may be a simple yet effective metric to use for investors with exposure to stocks as well as bonds. The ratio is the inverse of the price-to-earnings (P/E) ratio, which is commonly applied to find undervalued stocks. However, when one looks to compare stocks with fixed income securities or the market, earnings yield is a more appropriate ratio.
Earnings Yield is measured as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield is more likely to provide better returns, other factors remain constant.
Moreover, Earnings Yield can be used to compare the performance of a market index with the 10-year Treasury yield. When the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued in comparison to bonds and vice versa. In such a situation, for value investors, investing in the stock market may be a better option than in the bond market.
However, it is important to remember that T-bills are risk free, while stock investments come with a caveat. It would be a good idea to add a risk premium to the Treasury yield while comparing it with earnings yield of a stock or the overall 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.
Here are four of the nine stocks that made it through the screen:
Tech Data Corporation is a leading provider of Internet technology products, logistics management and other value-added services. The company sports a Zacks Rank #1 and its expected EPS growth rate for the next 3–5 years is 22.8%.
Methanex Corporation (MEOH - Free Report) is a Vancouver based company engaged in the worldwide production and marketing of methanol. This Zacks Rank #1 stock has an expected EPS growth rate of 15% for the next 3–5 years. You can see the complete list of today’s Zacks #1 Rank stocks here.
POSCO (PKX - Free Report) manufactures hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. This Zacks Rank #2 company has an expected EPS growth rate of 5% for the next 3–5 years.
Mobile TeleSystems OJSC aims to build an integrated mobile communications world, which will bring people together, enrich their lives and open up new horizons, both at work and at home. This Zacks Rank #1 company has an expected EPS growth rate of 10.9% 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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Pick These 4 High Earnings Yield Stocks Right Away
Earnings Yield may be a simple yet effective metric to use for investors with exposure to stocks as well as bonds. The ratio is the inverse of the price-to-earnings (P/E) ratio, which is commonly applied to find undervalued stocks. However, when one looks to compare stocks with fixed income securities or the market, earnings yield is a more appropriate ratio.
Earnings Yield is measured as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with higher earnings yield is more likely to provide better returns, other factors remain constant.
Moreover, Earnings Yield can be used to compare the performance of a market index with the 10-year Treasury yield. When the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued in comparison to bonds and vice versa. In such a situation, for value investors, investing in the stock market may be a better option than in the bond market.
However, it is important to remember that T-bills are risk free, while stock investments come with a caveat. It would be a good idea to add a risk premium to the Treasury yield while comparing it with earnings yield of a stock or the overall 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.
Here are four of the nine stocks that made it through the screen:
Tech Data Corporation is a leading provider of Internet technology products, logistics management and other value-added services. The company sports a Zacks Rank #1 and its expected EPS growth rate for the next 3–5 years is 22.8%.
Methanex Corporation (MEOH - Free Report) is a Vancouver based company engaged in the worldwide production and marketing of methanol. This Zacks Rank #1 stock has an expected EPS growth rate of 15% for the next 3–5 years. You can see the complete list of today’s Zacks #1 Rank stocks here.
POSCO (PKX - Free Report) manufactures hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. This Zacks Rank #2 company has an expected EPS growth rate of 5% for the next 3–5 years.
Mobile TeleSystems OJSC aims to build an integrated mobile communications world, which will bring people together, enrich their lives and open up new horizons, both at work and at home. This Zacks Rank #1 company has an expected EPS growth rate of 10.9% 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 »