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Alberto Abaterusso
Alberto Abaterusso
Articles (1765) 

A Trio of Cheap High Earnings Yield Stocks

CBS tops the list

November 10, 2019 | About:

To find value opportunities, investors should search for stocks that offer earnings yields that more than double the returns of 20-year high-quality market corporate bonds. Holders of these bonds receive a 3.48% monthly spot rate.

The bonds represent corporate loans issued by triple-A, double-A and single-A-rated companies. These issuers will unlikely have financial difficulties, implying for their shareholders a very low investment risk.

Thus, the following stocks have a price-earnings ratio, which is the inverse of the earnings yield, of less than 14.37.

CBS 

Shares of CBS Corp. (NYSE:CBS) closed at $38.11 on Friday for a market capitalization of $14.37 billion. The New York-based mass media company has an earnings yield of 21.4% versus the industry median of 5.7% and a price-earnings ratio of 4.67 versus the industry median of 17.64.

The stock has fallen 26.5% over the past five years through Nov. 8, sending the share price lower to a cheap valuation based on the Peter Lynch chart.

GuruFocus assigned a low 3 out of 10 rating for the company's financial strength, but a high 8 out of 10 rating for its profitability.

The stock grants a forward dividend yield of 1.89% as of Friday.

Wall Street issued an overweight recommendation rating for shares of CBS with an average target price of $48.41.

BorgWarner

Shares of BorgWarner Inc. (NYSE:BWA) closed at $46.31 on Friday for a market capitalization of $9.56 billion. The Auburn Hills, Michigan-based provider of parts for combustion, hybrid and electric vehicles has an earnings yield of 8% versus the industry median of 7.1% and a price-earnings ratio of 12.74 versus the industry median of 14.17.

The stock price is down 16.54% over the past five years and shares seem to be cheap based on the Peter Lynch chart.

BorgWarner has received a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10 from GuruFocus.

The stock grants a forward dividend yield of 1.47% as of Friday.

The stock has an overweight recommendation rating and an average target price of $47.13 per share.

Oshkosh

Shares of Oshkosh Corp. (NYSE:OSK) closed at $90.07 on Friday with a market capitalization of $6.2 billion. The Oshkosh, Wisconsin-based designer, builder and seller of specialty vehicles and vehicle bodies has an earnings yield of 9.1% versus the industry median of 7.5% and a price-earnings ratio of 10.98 versus the industry median of 13.26.

The stock still seems to be cheap according to the following Peter Lynch chart, despite a 97% increase in its share price over the past five years.

GuruFocus assigned the company a very positive financial strength rating of 7 out of 10 and a high profitability rating of 8 out of 10.

The stock offers a forward dividend yield of 1.33% as of Nov. 8.

Analysts issued an overweight recommendation rating for shares of Oshkosh and have set an average target price of $96.20.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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