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Alberto Abaterusso
Alberto Abaterusso
Articles (1975) 

3 High Earnings Return Stocks for the Value Investor

Their yields more than double the 20-year high-quality market corporate bonds' spot rate

January 21, 2020 | About:

In order to uncover value opportunities, investors may want to pick stocks whose earnings yields have more than doubled the returns of 20-year high-quality market corporate bonds.

These bonds grant their holders a 3.51% monthly spot rate. Also, as these securities correspond to corporate loans issued by triple-A, double-A and single-A-rated companies, they imply a very low investment risk for both bondholders and shareholders.

The following stocks may represent an opportunity for investors, as they have recently topped the spot rate for 20-year high-quality market corporate bonds, showing an earnings return of more than 7.02%.

TD Ameritrade

The first company to consider is TD Ameritrade Holding Corporation (NASDAQ:AMTD).

Shares of the Omaha, Nebraska-based securities broker and financial services provider closed at $50.53 per unit on Jan. 20 for a market capitalization of $27.31 billion.

The stock offers an earnings yield of 7.84% versus the industry median of 5.7% and a price-earnings ratio of 12.76 versus the industry median of 17.58.

The stock has grown 48.6% over the past five years through Jan. 20. Nonetheless, it is still trading below the Peter Lynch earnings line.

GuruFocus assigned a rating of 3 out of 10 for the company’s financial strength rating and of 5 out of 10 for its profitability.

The stock grants a forward dividend yield of 2.45% as of Monday versus the S&P 500's yield of 1.75%. Wall Street recommends a hold rating with a price target of $52.42 per share.

Farmers & Merchants Bancorp

The second company to consider is Farmers & Merchants Bancorp (FMCB).

Shares of the Lodi, California-based holding company of Farmers & Merchants Bank of Central California closed at $774.99 on Monday for a market capitalization of $610.16 million.

The stock has an earnings yield of 8.9% versus the industry median of 8.3% and a price-earnings ratio of 11.2 versus the industry median of 12.

The stock price has risen 67.4% over the past five years. Regardless of this substantial growth, the share price is still below the Peter Lynch earnings line.

Farmers & Merchants Bancorp has received a GuruFocus rating of 5 out of 10 for its financial strength and 4 out of 10 for its profitability.

The stock grants a forward dividend yield of 1.85% as of Monday versus the S&P 500's yield of 1.75%.

Alico Inc

The third company to consider is Alico Inc (NASDAQ:ALCO).

Shares of the Fort Myers, Florida-based operator of agribusinesses and land management companies closed at $37.29 on Monday with a market capitalization of $278.75 million.

The stock has an earnings yield of 13.6% compared to the industry median of 8.3% and a price-earnings ratio of 7.38 versus the industry median of 20.02.

The stock price has fallen nearly 29% in the past five years through Jan. 20. As a result, its share price is below the Peter Lynch earnings line.


GuruFocus assigned the company a rating of 5 out of 10 for its financial strength and a rating of 6 out of 10 for its profitability.

The stock has been paying dividends for almost four decades. It grants a forward dividend yield of 0.97% as of Monday.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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