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Markets & Finance

Value Stocks with Juicy Payouts


By Numer de Guia, CFA Attractive valuations and above-market dividend yields. The combination sounds enticing: the chance to realize capital appreciation on a stock while getting paid to own it -- at a payout rate greater than the average of that for the S&P 500-stock index.

That notion animates this week's screen. First, we set to work on the value part. But this time around, we wanted to go deeper than just

price-earnings ratios. We wanted to find stocks that were valued below the market by three other yardsticks. So we mined our database for those issues currently trading below the S&P 500 based on the index':

Price-to-

cash-flow ratio of 12.824

Price-to-

book value ratio of 2.967

Price-to-sales ratio of 1.514

But of course, an undervalued stock will stay that way unless it has potential to close the gap through capital appreciation. So we then screened for issues ranked 4

STARS (accumulate) or 5 STARS (buy) by Standard & Poor's equity analysts. Stocks with those designations are expected to outperform the overall market over the next 6 to 12 months.

Then we took care of the yield part. We sifted for stocks with a dividend yield higher than the S&P 500 average of 1.643%.

When we finished our search, 18 names emerged:

LOW VALUATION, ABOVE-AVERAGE YIELDS

Company

Ticker

S&P STARS Rank

Alcoa

AA

4

BCE

BCE

5

ChevronTexaco

CVX

5

Chubb

CB

4

Constellation Energy

CEG

5

Endesa

ELE

5

Endurance Specialty Holdings

ENH

4

Glatfelter

GLT

4

Goodrich

GR

4

Great Plains Energy

GXP

4

Lance

LNCE

4

Lincoln National

LNC

4

Lubrizol

LZ

4

Manor Care

HCR

4

Marathon Oil

MRO

4

ONEOK

OKE

4

RPM International

RPM

4

Xcel Energy

XEL

4

De Guia is an analyst for Standard & Poor's Portfolio Advisors


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