Picking stocks that more than double the earnings return that 20-year high-quality corporate bonds are giving to their holders could be of help to unearth value opportunities, in my opinion. Holders of these bonds, which represent corporate loans issued by triple-A, double-A and single-A companies, are currently being offered at a 3.26% monthly return.
The following stocks have earnings returns of more than 6.52% and price-earnings ratios standing below 15.34.
Honeywell International Inc
Shares of Honeywell International Inc (HON, Financial) traded at a price of $122.97 per unit at close on Wednesday for a market capitalization of $86.31 billion.
The Charlotte, North Carolina-based global diversified technology and manufacturing company offers an earnings yield of 7.08% and has a price-earnings ratio of 14.13.
The share price has declined by 30.5% so far this year, but Wall Street sell-side analysts predict that it will bounce back up to the price target of $153.57 per share, gaining nearly 25% from Wednesday’s closing price.
GuruFocus assigned a positive rating of 6 out of 10 for the company's financial strength and a higher rating of 8 out of 10 for its profitability.
Cummins Inc
Shares of Cummins Inc (CMI, Financial) traded at a price of $147.68 per unit at close on Wednesday for a market capitalization of $21.79 billion.
The Columbus, Indiana-based manufacturer and distributor of diesel and natural gas powered engines to several industries worldwide offers an earnings yield of 9.23% and has a price-earnings ratio of 10.84.
The share price has declined by 17.5% so far this year. However, Wall Street sell-side analysts forecast that it will rebound strongly and hit the price target of $168.19 per share, marking an almost 14% growth from Wednesday’s closing price.
GuruFocus assigned a positive rating of 6 out of 10 for the company’s financial strength and a high rating of 9 out of 10 for its profitability.
Rogers Communications Inc
Shares of Rogers Communications Inc (RCI, Financial) traded at a price of $39.59 per unit at close on Wednesday for a market capitalization of $20.19 billion.
The Canadian telecommunication services company offers an earnings yield of 6.96% and a price-earnings ratio of 14.36.
The share price has declined by 20.3% so far this year. However, Wall Street sell-side analysts predict that it will outperform and have set an average target price of $47.06, which represents a nearly 20% upside from Wednesday's closing price.
GuruFocus assigned the stock a low rating of 3 out of 10 for its financial strength and a high rating of 9 out of 10 for its profitability.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Stocks That Have Grown Sales Fast
- A Potentially Undervalued Trio to Consider
- 3 Low Price-Book Ratio Stocks for the Value Investor
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