5 High Earnings Yield Stocks To Buy Now

Investors often use P/E ratio and other valuation metrics while picking undervalued stocks with solid upside potential. However, its inverse, the Earnings Yield, is more useful for investors who play in both stocks and bonds as P/E ratio cannot be used to compare stocks with fixed income securities.

Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. Other things remaining constant, a stock with a higher earnings yield has the potential to provide comparatively greater returns.

Often, earnings yield is used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In such a circumstance, investing in the stock market would be a better option for a value investor.

However, you need to keep in mind that T-bills are risk free. Hence, it would be a good idea to add a risk premium to the Treasury yield while comparing it with the earnings yield of a stock or the stock market.

The Winning Strategy

We have set Earnings Yield greater than 10% as our primary screening criterion, but it alone cannot be used for selecting stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:

Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS Estimate with the 12-month Actual EPS.

Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.

Current Price greater than or equal to $5.00.

Zacks Rank less than 3: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) generally outperform their peers in any type of market environment.

Here are five of the 15 stocks that made it through the screen:

CVR Refining, LP (NYSE:CVRR) is engaged in the refining of petroleum primarily in the U.S. The company carries a Zacks Rank #2. Its expected EPS growth rate for 3–5 years is 18.10%.

Korea Electric Power Corp. (NYSE:KEP) is an integrated electric utility engaged in the generation, transmission, distribution of electricity and development of electric power resources in South Korea. This Rank #2 stock has an expected EPS growth rate of 25% for the next 3–5 years.

Owens-Illinois Inc. (NYSE:OI) along with its subsidiaries is presently the largest manufacturer of glass containers in the world. The company carries a Zacks Rank #1 and its expected EPS growth rate for the next 3–5 years is 10.70%.

BG Staffing, Inc. (NYSE:BGSF) provides staffing services to a variety of industries through its various divisions. The company currently carries a Zacks Rank #1. Its expected EPS growth rate for 3–5 years is pegged at 20%.

Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) is engaged in a wide variety of banking, financial and related activities in Spain. This Rank #2 company has an expected EPS growth rate of 20.3% for the next 3–5 years.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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