If you screen for all New York Stock Exchange stocks with price-earnings ratios of less than 15 and dividend yields of greater than 3%, you can find good possibilities for further research. It's a simple, basic method for uncovering value while others chase growth. These stocks are cheap in the classic sense - low price for the amount of earnings, with management showing an interest in the investor by paying a dividend.
The three stocks listed below, which meet the above criteria, represent enough different stock market sectors that you could almost use the "diversified" word to describe them as a mini-portfolio. One is a steel manufacturing outfit based in Europe. One of the oldest names in the energy field is represented. One is a large Canadian insurer. Growth investors seem to be passing them by, and thus they are showing up on value screens.
Ternium
Headquartered in Luxembourg, Ternium (TX, Financial) makes steel, still a necessary component for much construction, including that of infrastructure. The company has operations in the United States, Argentina, Brazil, Columbia, Guatemala and Mexico.
Earnings per share grew this year by 38%. The five-year EPS growth rate is 149%. Analysts are not expecting that rapid pace to continue but predict decent growth in the years to come. The price to free cash flow ratio is 8.51. Shareholder equity greatly exceeds any long-term debt. With a price-earnings ratio about 5, the stock is now trading at just 1.29 times book value, so it seems to be a Benjamin Graham-style equity. Average daily volume is a relatively light 859,000 shares, perhaps keeping it out of the portfolios of very large institutional investors. Ternium is paying a dividend yield of 3.74%.
Associated Banc-Corp
Associated Banc-Corp (ASB, Financial) is a regional bank based in Wisconsin that's been doing business since 1861. The company has branch operations now in that state as well as in Illinois and Minnesota, and with commercial financial services in Indiana, Michigan, Missouri, Ohio and Texas.
The stock is available for purchase now at a 16% discount from its book value. The price-earnings ratio is 11.73, significantly less than the Shiller price-earnings ratio of 38.59 for the S&P 500. Earnings per share growth this year is -2.75%. EPS growth for the past five years is 9.61%. The price to free cash flow ratio is 9.8. Long-term debt is substantially less than equity. The stock trades an average daily volume of 1.76 million shares on the NYSE. Investors receive a 3.42% dividend yield.
British Petroleum
BP PLC (BP, Financial), aka British Petroleum, has been in the oil and gas business since 1901. BP brands include the original namesake as well as Castrol, Amoco and Wild Bean Cafe, among others.
With an average daily volume on the New York Stock Exchange of 11.87 million shares, liquidity is unlikely to be a concern - at least on typical days. With a price-earnings ratio of 9.86, the stock is now trading at 1.08 times book value, so it's a fit as a classic value-style stock. The price to free cash flow ratio is 22.74. Earnings per share are way off this year, down by 608%. The five-year EPS growth rate is -23%. Long-term debt is less than shareholder equity, but not by that much. British Petroleum pays a nice dividend of 5%.
Although each of these stocks fit the basic value mold, they may not be for everyone. However, they could be ideas for further research and more consideration.
