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4 Solid Earnings Yield Stocks to Boost Your Portfolio
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If you are not sure whether to invest your money in stocks or bonds, one important financial metric that can show you the right way is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This ratio can be utilized for identifying undervalued stocks. Also, this ratio can be effectively used 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 which gives high earnings yield should fetch higher returns.
This ratio is also very useful while comparing the performance of the market with the 10-year Treasury yield. When the yield of the market index is higher than the 10-year Treasury yield, stocks can be viewed as undervalued in comparison to bonds. This means 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 involves some inherent risks. Hence, it would 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.
Here are four of the 18 stocks that made it through the screen:
Lafayette, IN-based Wabash National Corporation (WNC - Free Report) is a leading manufacturer of semi trailers in North America. It has a Zacks Rank #2 and an expected EPS growth rate of 21.5% for the next 3–5 years.
Los Angeles, CA-based KB Home (KBH - Free Report) constructs and sells a variety of new homes. It has a Zacks Rank #1 and an expected EPS growth rate of 16% for the next 3–5 years.
Dallas, TX-based Kronos Worldwide Inc (KRO - Free Report) is a global producer and marketer of value-added titanium dioxide pigments. It has a Zacks Rank #1 and an expected EPS growth rate of 5% for the next 3–5 years.
Madrid, Spain-based Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - Free Report) is engaged in a wide variety of banking, financial and related activities in Spain. It has a Zacks Rank #2 and an expected EPS growth rate of 15.8% 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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4 Solid Earnings Yield Stocks to Boost Your Portfolio
If you are not sure whether to invest your money in stocks or bonds, one important financial metric that can show you the right way is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. This ratio can be utilized for identifying undervalued stocks. Also, this ratio can be effectively used 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 which gives high earnings yield should fetch higher returns.
This ratio is also very useful while comparing the performance of the market with the 10-year Treasury yield. When the yield of the market index is higher than the 10-year Treasury yield, stocks can be viewed as undervalued in comparison to bonds. This means 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 involves some inherent risks. Hence, it would 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:
Lafayette, IN-based Wabash National Corporation (WNC - Free Report) is a leading manufacturer of semi trailers in North America. It has a Zacks Rank #2 and an expected EPS growth rate of 21.5% for the next 3–5 years.
Los Angeles, CA-based KB Home (KBH - Free Report) constructs and sells a variety of new homes. It has a Zacks Rank #1 and an expected EPS growth rate of 16% for the next 3–5 years.
Dallas, TX-based Kronos Worldwide Inc (KRO - Free Report) is a global producer and marketer of value-added titanium dioxide pigments. It has a Zacks Rank #1 and an expected EPS growth rate of 5% for the next 3–5 years.
Madrid, Spain-based Banco Bilbao Vizcaya Argentaria, S.A. (BBVA - Free Report) is engaged in a wide variety of banking, financial and related activities in Spain. It has a Zacks Rank #2 and an expected EPS growth rate of 15.8% 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 »