Investors who are in search of high return investments could be interested in the three non-cyclical stocks listed below, as their earnings yields (as calculated via Joel Greenblatt's method) are outperforming the U.S. market.
Greenblatt calculates the earnings yield as the company's earnings before interest and tax (Ebit) divided by its enterprise value. This ratio represents a more reliable reference for the evaluation of non-cyclical stocks, whose earnings have little or no correlation with the business cycle (as the metric only looks at 12 months of operating activities).
As of the writing of this article, the S&P 500's mean historical earnings yield of 9.5%. The following stocks are surpassing the S&P 500 in terms of a higher earnings yield.
Japan Tobacco Inc
The first stock to consider is Japan Tobacco Inc (JAPAF, Financial), a Tokyo-based tobacco company.
The stock offers an earnings yield of 15.20% as of the most recent quarter that ended in September 2020. This stands above the median point of the past 10-year historical earnings yield range of 6.8% to 15%. Japan Tobacco's earnings yield ranks higher than 77% of 44 companies that are operating in the tobacco products industry.
The share price traded at around $19.80 at close on Thursday for a market capitalization of $35.47 billion and a 52-week range of $16.03 to $21.67. The stock has fallen 5.9% over the past year.
Its price-earnings ratio is 12.65 and the price-book ratio is 1.51.
Currently, Japan Tobacco Inc pays dividends. In 2020, the tobacco manufacturer paid two semi-annual dividends of 77 Japanese yen (about $0.74) each per common share, for a trailing 12-month dividend yield of 7.44% as of Jan. 28.
On Wall Street, as of January, the stock has a median recommendation rating of hold with an average target price of about $22.23 per share.
Among the top fund holders of the company, Ancora Advisors LLC is the leader with 2.82% of shares outstanding.
Imperial Brands PLC
The second stock to consider is Imperial Brands PLC (IMBBY, Financial), a British tobacco manufacturer.
The company offers an earnings yield of 11.34% as of the most recent quarter that ended in September 2020. Imperial Brands PLC's current earnings yield stands significantly above the median point of the 10-year historical range of 3% to 12% and ranks higher than 70% of the 44 companies that are operating in the tobacco products industry.
The share price was trading at around $20.96 at close on Thursday for a market capitalization of $19.84 billion and a 52-week range of $14.42 to $25.83. The stock has declined by 17.43% over the past year.
Its price-earnings ratio is 9.67 and the price-book ratio is 2.94.
Currently, Imperial Brands PLC pays quarterly dividends to its shareholders with the last distribution, 65.4 cents per common share, made on Jan. 8. It produces a forward dividend yield of 9.9% as of Jan. 28.
On Wall Street, as of January, the stock has a median recommendation rating of overweight with an average target price of $26.78 per share.
Parametric Portfolio Associates LLC leads the group of top fund holders of the company, owning 0.10% of shares outstanding. It is followed by Schafer Cullen Capital Management Inc with 0.08% of shares outstanding and Logan Capital Management Inc with 0.01% of shares outstanding.
Industrias Bachoco SAB de CV
The third stock to consider is Industrias Bachoco SAB de CV (IBA, Financial), a Mexican producer of poultry in the U.S. and Mexico.
The company offers an earnings yield of 21.37% as of the most recent quarter that ended in September 2020. Currently, Industrias Bachoco's earnings yield stands significantly above the median point of the 10-year historical range of 6.2% to 37.8% and ranks higher than 95% of 1,726 companies that are operating in the consumer-packaged goods industry.
The share price traded at $41.89 at close on Thursday for a market capitalization of $2.09 billion and a 52-week range of $28.04 to $50.43. The stock has fallen by 12.32% over the past year.
Its price-earnings ratio is 13.46 and the price-book ratio is 0.97.
Currently, Industrias Bachoco pays dividends. In 2020, the tobacco manufacturer paid two semi-annual dividends, one of 35 cents per common share on July 17 and one of 32.7 cents per common share on May 22, for a trailing 12-month dividend yield of 1.62% as of Jan. 28.
On Wall Street, as of January, the stock has a median recommendation rating of overweight with an average target price of $51.73 per share.
Jim Simons (Trades, Portfolio) leads the group of top fund holders of the company with 1.34% of shares outstanding. He is followed by Everett Harris & Co /Ca/ with 0.24% of shares outstanding and Chuck Royce (Trades, Portfolio) with 0.21% of shares outstanding.
Disclosure: I have no position in any security mentioned.
Read more here:
- A Trio of High-Return Businesses With Solid Balance Sheets
- 3 Stocks Trading Below the Peter Lynch Fair Value
- 3 High-Return Stock Picks
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