Selecting stocks whose earnings return is more than twice the average of 20-year high-quality corporate bonds enhances the chances to find high-yield investments, in my opinion. This category of investment grade bonds represents corporate loans that triple-A, double-A and single-A rated companies have taken out with their lenders.
Since 20-year high-quality corporate bonds grant a monthly spot rate of 3.18% (as of June 2020) to their holders, the following three stocks may hold value, as they grant earnings returns of more than 6.36% at price-earnings ratios of less than 15.72.
SLM Corp
Shares of SLM Corp (SLM, Financial) were trading at $6.87 each at close on Thursday for a market capitalization of $2.58 billion.
The Newark, Delaware-based provider of education loans to support students and their families in financing the cost of the education in the U.S. grants an earnings return of 18.2% and has a price-earnings ratio of 5.5.
The share price has lost nearly 20% over the past year, determining a 52-week range of $5.60 to $12.32.
GuruFocus assigned a low rating of 3 out of 10 for the company's financial strength and a moderate rating of 4 out of 10 for the profitability.
Wall Street sell-side analysts recommend an overweight rating for this stock and have established an average target price of $9.77 per share.
E*TRADE Financial Corp
Shares of E*TRADE Financial Corp (ETFC, Financial) were trading at a price of $51.38 per unit at close on Thursday for a market capitalization of $11.36 billion.
The New York-based online financial broker grants an earnings return of 6.68% and has a price-earnings ratio of 14.96.
The stock has risen by nearly 20% over the past year for a 52-week range of $25.76 to $57.30.
GuruFocus assigned a low rating of 3 out of 10 to the company’s financial strength and a moderate rating of 4 out of 10 to its profitability.
Wall Street sell-side analysts recommend a hold rating for the stock and have set an average target price of $52.50 per share.
Fox Corp
Shares of Fox Corp (FOX, Financial) were trading at $25.16 per unit at close on Thursday for a market capitalization of $15.13 billion.
The New York-based news, sports and entertainment company in the U.S. grants an earnings return of 6.44% and has a price-earnings ratio of 15.54.
The stock has declined by 28.1% over the past year for a 52-week range of $19.13 to $38.91.
GuruFocus assigned a positive rating of 5 out of 10 to the company’s financial strength and a moderate rating of 4 out of 10 to its profitability.
Wall Street sell-side analysts recommend an overweight recommendation rating for the stock and have produced an average target price of $29.11 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Low Price-Book Stocks
- 3 Stocks Growing Capex Fast
- A Trio of Fast-Growing Small Caps to Consider
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