4 High Earnings Yield Stocks To Strengthen Your Portfolio

There are some financial parameters that are very important in taking wise investment decision. Sometimes, investors are not sure whether to keep their money in stocks or bonds. In such cases, proper selection of financial metrics can show the right direction.

One such financial metric is earnings yield. It is the reciprocal of the price-to-earnings (P/E) ratio. In fact, this ratio is very useful in finding out undervalued stocks. It is also very handy for making a comparative analysis with the market or fixed income securities.

Earnings yield is measured as (Annual Earnings per Share/Market Price) x 100. This is very useful in comparing stocks coming from same sector or industry. The stock with higher earnings yield is likely to produce better returns.

This ratio can also be used for comparing the performance of a market index with the 10-year Treasury yield. When the yield of the market index is more than the 10-year Treasury yield, the stocks can be considered as undervalued in comparison to bonds. This gives an indication that investing in the stock market is a better option for a value investor.

Treasury-bills investment is free of risks. However, investing in stocks always comes with a caveat. Hence, it is an excellent idea to add a risk premium to Treasury yield while comparing it with the earnings yield of a stock or the broader market.

The Winning Strategy

We have set Earnings Yield greater than 8% as our primary screening criterion, but it alone cannot be used for picking 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.

Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Pohang, South Korea-based POSCO (NYSE:PKX) is engaged in manufacturing hot and cold rolled steel products, heavy plate and other steel products for the construction and shipbuilding industries. This Zacks Rank #1 stock has an expected EPS growth rate of 5% for the next 3–5 years.

Tata Motors Limited (NYSE:TTM) is India’s leading automotive manufacturer. It has a Zacks Rank #2 and an expected EPS growth rate of 45.7% for the next 3–5 years.

TRI Pointe Group, Inc. (NYSE:TPH) is engaged in designing, construction and sale of single-family homes. This Zacks Rank #2 stock has an expected EPS growth rate of 11% for the next 3–5 years.

Hamilton, Bermuda-based Triton International Limited (NYSE:TRTN) is engaged in offering acquisition, leasing, re-leasing, and sale of intermodal containers. It has a Zacks Rank #1 and an expected EPS growth rate of 7.5% for the next 3–5 years.

You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.

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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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Triton International Limited (TRTN): Free Stock Analysis Report

Tata Motors Ltd (TTM): Free Stock Analysis Report

TRI Pointe Group, Inc. (TPH): Free Stock Analysis Report

POSCO (PKX): Free Stock Analysis Report

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