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Bet on 4 High Earnings Yield Stocks to Boost Your Portfolio
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Investors who are not sure of whether to invest their money in stocks or bonds can count on an important financial parameter namely earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio and can be used for spotting undervalued stocks. Also, the ratio is very helpful for investors comparing stocks with the market or fixed income securities.
Earnings Yield can be computed as (Annual Earnings per Share/Market Price) x 100. It is very handy in comparing a stock with other stocks as well as with fixed income securities. While comparing similar stocks, the one which gives high earnings yield should provide better returns.
This ratio can also be effectively used for comparing the performance of a market with the 10-year Treasury yield. When the yield of the market index exceeds the 10-year Treasury yield, stocks can be regarded as 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 comes with a caveat. Hence, it would be wise to add a risk premium to the Treasury yield while making comparison 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 33 stocks that made it through the screen:
Micron Technology, Inc. (MU - Free Report) is a leading player in innovative memory and storage solutions. It has a Zacks Rank #1 and an expected EPS growth rate of 10% for the next 3–5 years.
Volkswagen AG is an automobile manufacturer in Europe. This Zacks Rank #1 stock has an expected EPS growth rate of 18.7% for the next 3–5 years.
Pohang, South Korea-based POSCO (PKX - Free Report) is engaged in manufacturing hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. This Zacks Rank #2 stock has an expected EPS growth rate of 5% for the next 3–5 years.
TRI Pointe Group, Inc. (TPH - Free Report) is engaged in designing, construction and sale of single-family homes. This Zacks Rank #2 stock has an expected EPS growth rate of 11% 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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Bet on 4 High Earnings Yield Stocks to Boost Your Portfolio
Investors who are not sure of whether to invest their money in stocks or bonds can count on an important financial parameter namely earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio and can be used for spotting undervalued stocks. Also, the ratio is very helpful for investors comparing stocks with the market or fixed income securities.
Earnings Yield can be computed as (Annual Earnings per Share/Market Price) x 100. It is very handy in comparing a stock with other stocks as well as with fixed income securities. While comparing similar stocks, the one which gives high earnings yield should provide better returns.
This ratio can also be effectively used for comparing the performance of a market with the 10-year Treasury yield. When the yield of the market index exceeds the 10-year Treasury yield, stocks can be regarded as 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 comes with a caveat. Hence, it would be wise to add a risk premium to the Treasury yield while making comparison 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 33 stocks that made it through the screen:
Micron Technology, Inc. (MU - Free Report) is a leading player in innovative memory and storage solutions. It has a Zacks Rank #1 and an expected EPS growth rate of 10% for the next 3–5 years.
Volkswagen AG is an automobile manufacturer in Europe. This Zacks Rank #1 stock has an expected EPS growth rate of 18.7% for the next 3–5 years.
Pohang, South Korea-based POSCO (PKX - Free Report) is engaged in manufacturing hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. This Zacks Rank #2 stock has an expected EPS growth rate of 5% for the next 3–5 years.
TRI Pointe Group, Inc. (TPH - Free Report) is engaged in designing, construction and sale of single-family homes. This Zacks Rank #2 stock has an expected EPS growth rate of 11% 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 »