Value investing is back. Investors are flocking to anything with perceived value to avoid the market swings we are seeing every day. There are many different methods and formulas you can use to identify undervalued dividend stocks. The dividend growth model is one that we have mentioned before. Discounted cash flow and comparing current dividend yield to average yields are also often used.
We didn’t use any of those models to identify these three stocks. Instead we first found stocks trading at a price to book value ratio of less than 1. We further filtered that list down by removing any stock with a P/E and PEG ratio above their specific industry average. It’s important to compare P/E ratios to industry averages instead of index averages because not all industry trading at the same level.
After drilling down into value we then sorted stocks by dividend yield to only include those with a yield of 3% or more. We ended up with over 20 stocks many of which are REITs. Each of these stocks has a story and it’s important to do your homework to determine if these fundamentals are predicting a big upside or a possible problem at the company.
A good example would be two stocks you’ve probably heard of before – Whirlpool and Computer Science Corp. Both had disappointing earnings results recently and have analysts concerned about future growth. Other stocks such as Transocean have solid fundamentals, a high yield and the backing of many analysts making it one of the best dividend stocks on the list.
|Company||Symbol||Price / |
|SK Telecom Co., Ltd.||SKM||0.92||6.5||0.88||4.95|
|Sims Metal Management Ltd.||SMS||0.94||8.54||0.5||3.41|
|Speedway Motor Sports, Inc.||TRK||0.63||10.54||2.11||3.11|
|Hooker Furniture Corporation||HOFT||0.86||9.49||0.79||3.98|
|Brown Shoe Company, Inc.||BWS||0.95||7.39||0.48||3.17|
|American Greetings Corporation||AM||0.81||5.52||0.55||3.69|
|Computer Sciences Corporation||CSC||0.88||5.79||0.67||3.02|
|Redwood Trust, Inc.||RWT||0.88||11.1||2.47||9.3|
|Starwood Property Trust Inc||STWD||1||9.64||2.14||9.04|
|Apollo Commercial Real Estate||ARI||0.85||8.67||1.16||11.45|
|Chimera Investment Corporation||CIM||0.78||5.21||2.6||21.84|
|Colony Financial Inc||CLNY||0.77||7.26||1.21||8.92|
|Ashford Hospitality Trust, Inc||AHT||0.54||8.41||0.23||3.88|
|Hatteras Financial Corporation||HTS||0.99||6.89||3.81||15.33|