While screening for value, I searched for stocks that have a price-book ratio of between zero and 1, a debt to equity ratio that is less than 1, a price-earnings ratio that is between 0 and 15, no losses within the past five years and an earnings yield that is more than double the 20-year high quality market (thereafter HQM) corporate bond spot rate.
The yield curve of the HQM can be found on the Federal Reserve Bank of Saint Louis website. It is built using data from a high quality corporate bonds’ set. These high-quality securities are AAA, AA or A rated and represent the market of corporate bonds in an accurate way.
The yield of 4.3% on the 20-Year HGM corporate bond, which I have used as a benchmark for my stock screening, has been calculated as an average of the last 12 months’ spot rates.
In my stock screening, I have chosen those with a market capitalization of more than $3 billion, that are dividend payers and whose dividend yield – according to the most recent market valuation per share – is higher than the aforementioned yield of 4.3%.
The only stock that passes my stock screening is AEGON NV (AEG, Financial), the Dutch international life insurance, asset management and pensions company headquartered in the city of The Hague (The Netherlands).
Besides the current dividend yield of 5.19%, which is also higher than the S&P 500 current yield of 1.87%, what makes Aegon NV look attractive today are expectations on the company’s earnings for the next five-year period following fiscal 2017. Yahoo Finance reports an average annual growth 41.50% rate in the company’s earnings for the 2018-2022 period. However, I don’t know how much this growth – as forecasted by analysts – is reliable.
On the Nasdaq website, analysts’ estimates on Aegon’s earnings growth don’t go beyond year 2018: Aegon’s earnings are expected to grow 7.58% in 2017 and to grow 9.86% in 2018.
Higher earnings means more cash for its shareholders who as of today are receiving an annual distribution of 31 cents (U.S. dollars) for a dividend yield of 5.19%.
Aegon is currently trading at $5.82 per share on the New York Stock Exchange and with a total value of $12.06 billion in market capitalization. Aegon is trading nearly 38% higher than its 52-week low price of $4.22 per share and about 5.3% lower than its 52-week high price of $6.13 per share.
Year to date the stock gained 5.24%, and analysts foresee Aegon will hit $6.08 per share within the next 12 trading months. As of today, 18 analysts out of a total of 26 recommend holding shares of Aegon NV.
The multinational insurance company has a net profit margin (TTM) of 2.91% versus an industry average of 17.96%, and a return on assets (ROA) of 0.39% versus an industry average of 4.35%.
GuruFocus assigns Aegon NV a Profitability & Growth rating of 2 out of 10.
As of the most recent quarter of 2017, Aegon NV has approximately €12.88 billion in cash on hand and securities and €87.758 billion in long-term investments. Total current assets and liabilities of €56.353 billion and €10.642 billion lead to a current ratio of 5.3 versus an industry average of 1.26. Total liabilities are valued at €380.414 billion and the stockholders’ equity is valued at €24.211 billion. The total debt to equity ratio is 130.3% versus an industry average of 99.17%.
GuruFocus gives Aegon NV a financial strength rating of 5 out of 10.
Aegon NV has about 2.04 billion shares outstanding, of which 1.75 billion is float. A percentage of 10.61% of Aegon’s total shares outstanding is held by institutions.
As of June 29, Dodge & Cox Inc. stands out against the other top institutional holders with 107,897,358 shares held in Aegon NV or 35.05% of the total volume of its own shares outstanding.
Disclosure: I have no positions in Aegon NV.
