Looking for stocks with high earnings yields can raise your chances of discovering value opportunities. One way to measure this is by looking for stocks that outperform the 20-year high-quality market corporate bonds. This benchmark, which hints at a near-zero investment risk as it represents the corporate loan issued by triple-A, double-A and single-A rated companies, yields a monthly spot rate of 3.35% as of March 29.
Thus, value investors should consider the following stocks, as their earnings yields are more than double the above-listed percentage of return of the risk-free rate investment. These stocks also have price-earnings ratios of less than 14.93.
Alimentation Couche-Tard
Shares of Alimentation Couche-Tard Inc ANCTF traded at a price of $23.50 per unit at close on Friday for a market capitalization of $25.33 billion.
The Canadian operator of licensed convenience stores offers an earnings yield of 7.4% and a price-earnings ratio of 13.53. The share price is down 27% so far this year.
GuruFocus assigned a positive rating of 6 out of 10 for the company's financial strength and a high rating of 8 out of 10 for its profitability.
The stock has a forward dividend yield of 0.82% as of Friday.
Wall Street issued a buy recommendation rating for this stock and has set an average price target of $30.35 per share.
Trane Technologies
Shares of Trane Technologies PLC TT traded at a price of $82.67 per unit at close on Friday for a market capitalization of $19.71 billion.
The Irish specialty industrial machinery company offers an earnings yield of 7% and a price-earnings ratio of 14.30. The share price has fallen about 20% so far this year.
GuruFocus assigned a moderate rating of 5 out of 10 for the company’s financial strength and a higher rating of 8 out of 10 for its profitability.
The stock grants a forward dividend yield of 2.56% as of Friday.
Wall Street sell-side analysts issued an overweight recommendation rating for this stock with an average target price is $111.38 per share.
Fortune Brands Home & Security
Shares of Fortune Brands Home & Security Inc FBHS traded at a price of $43.44 per unit at close on Friday for a market capitalization of $6.07 billion.
The Deerfield, Illinois-based provider of products for residential home repair, remodeling, and new construction offers an earnings yield of 7% and a price-earnings ratio of 14.2. The share price has fallen by 33.5% so far this year.
GuruFocus assigned the stock a moderate rating of 5 out of 10 for its financial strength and a near the top rating of 9 out of 10 for its profitability.
The stock grants a forward dividend yield of 2.21% as of Friday.
Wall Street recommends an overweight rating for this stock and has established an average target price of $62.85 per share.
Disclosure: I have no positions in any securities mentioned.
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