www.
Feature Screens

5 Highest Dividend Yields Among Undervalued Companies for the Enterprising Investor – October 2014

5ent-und-divThere are a number of great companies in the market today. By using the ModernGraham Valuation Model, I’ve selected the five highest dividend yields among the undervalued companies reviewed by ModernGraham. Each company has been determined to be suitable for Enterprising Investor according to the ModernGraham approach. This is a sample of one screen that is included in ModernGraham Stocks & Screens, which is available for premium subscribers.  Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.

SLM Corp (SLM)

Sallie_Mae_logo_2009SLM Corporation qualifies for the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the company’s lack of earnings or dividend stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.15 in 2010 to an estimated $1.57 for 2014. This level of demonstrated growth outpaces the market’s implied estimate of negative 1.45% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
SLM Chart

SLM data by YCharts

B&G Foods Inc. (BGS)

bg-foods-logoB&G Foods Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor has numerous concerns and in fact is only pleased by the size of the company and the earnings growth over the last ten years.  The Enterprising Investor’s only initial concern is the high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  From a valuation perspective, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $1.21 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 7.55% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
BGS Chart

BGS data by YCharts

People’s United Financial Inc. (PBCT)

PeoplesUnitedBankPeople’s United Financial qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the high PEmg ratio, but the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.34 in 2010 to an estimated $0.72 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 5.97% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.  (See the full valuation)
PBCT Chart

PBCT data by YCharts

Ford Motor Company (F)

500px-Ford_Motor_Company_Logo.svgFord Motor Company qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years as well as the inconsistent dividend history.  The company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $1.14 in 2010 to an estimated gain of $1.92 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.27% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
F Chart

F data by YCharts

International Paper Company (IP)

500px-International_Paper.svgInternational Paper Co. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the company’s low current ratio, as well as the insufficient earnings growth or stability over the last ten years.  The Enterprising Investor’s only issue is with the level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.80 in 2010 to an estimated $2.75 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 4.62% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the price.  (See the full valuation)
IP Chart

IP data by YCharts

What do you think?  Are these companies a good value for Enterprising Investors?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author held a long position in Ford Motor Company (F) but did not hold a position in any other company mentioned in this article at the time of publication and had no intention of changing those holdings within the next 72 hours.  Logos are taken from either the company page or Wikipedia for purposes of identifying the company only; ModernGraham has no affiliation with the companies.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top