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These 3 Stocks Grant High Earnings Yields

Their earnings yields beat the monthly spot rate on 20-Year high-quality market corporate bonds

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Alberto Abaterusso
Mar 19, 2020
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Choosing stocks that more than double the earnings return that 20-year high-quality corporate bonds offer increases the chance of unearthing value opportunities. Holders of these bonds, which represent corporate loans issued by triple-A, double-A and single-A-rated companies, are currently rewarded with a 3.35% monthly spot rate.

The following stocks give earnings returns of more than 6.7% and have price-earnings ratios standing below 14.92.

Norfolk Southern

Shares of Norfolk Southern Corp (

NSC, Financial) were trading at a price of $130.84 per unit at close on Wednesday for a market capitalization of $33.74 billion.

The Norfolk, Virginia-based provider of railroad transportation of raw materials, intermediate products and finished goods to customers in the U.S. grants an earnings yield of 7.8% and a price-earnings ratio of 12.76.

The stock has grown 18.5% over the past five years through March 19. Nonetheless, the share price trades slightly below the Peter Lynch earnings line, suggesting that the stock is not expensive.

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GuruFocus assigned a moderate rating of 4 out of 10 for the company's financial strength and a very high rating of 9 out of 10 for its profitability.

The stock has a forward dividend yield of 2.69% as of Wednesday.

Wall Street issued an overweight recommendation rating for this stock with an average price target of $209.71. The overweight rating means that the share price is foreseen to outperform.

Ross Stores

Shares of Ross Stores Inc (

ROST, Financial) were trading at a price of $59.97 per unit at close on Wednesday for a market capitalization of about $21.52 billion.

The Dublin, California-based operator of off-price retail apparel and home fashion stores grants an earnings yield of 7.7% and a price-earnings ratio of 13.04.

The stock has grown 11.6% over the past five years through March 19. Regardless of the significant rise, the share price trades slightly below the earnings line, which indicates that this stock is still an affordable investment.

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GuruFocus assigned a very positive rating of 7 out of 10 for the company’s financial strength and a very high rating of 9 out of 10 for its profitability.

The stock gives a forward dividend yield of 1.64% as of Wednesday.

Wall Street sell-side analysts recommend an overweight rating and have set an average target price of $115.65 per share.

Encompass Health

Shares of Encompass Health Corp (

EHC, Financial) were trading at a price of $52.92 per unit at close on Wednesday for a market capitalization of $5.21 billion.

The Birmingham, Alabama-based provider of post-acute healthcare services to U.S. patients grants an earnings yield of 6.8% and a price-earnings ratio of 14.66.

The stock has grown nearly 17% over the past five years through March 19. Nonetheless, the stock is still affordable as its share price currently trades near the earnings line.

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GuruFocus assigned a moderate rating of 4 out of 10 for the company’s financial strength and a near top rating of 9 out of 10 for its profitability.

The stock has a 2% forward dividend yield as of Wednesday.

Wall Street sell-side analysts recommend an overweight rating for this stock and have set an average target price of $90.57 per share.

Disclosure: I have no positions in any securities mentioned.

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