This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

'Out of Favor' Companies You'll Love

By Lisa Springer

NEW YORK ( StreetAuthority) -- If you're an income investor who has ever wanted to lock in a high yield, then know this: Sometimes you've got to reach for it.

Not every high yielder is going to be a world-dominating company with a pristine balance sheet.

In fact, few of them are.

That said, a great place to look for reliable high yields is among stocks that are currently out of favor.

The market often discards stocks and prices them accordingly when industries mature and cease growing. Yet, in most of these cases the mature industry is worth billions of dollars and in no danger of disappearing anytime soon.

These companies usually generate steady profits and can easily afford generous dividend payments, offering a compelling opportunity for income investors.

I created a list of out-of-favor stocks by screening for big price declines and then selecting profitable companies that have large amounts of cash, generating free cash flow that exceeds the dividend.

Here are the three best stocks that met my criteria. They may be unloved by Wall Street, but should find plenty of admirers among income investors.

1. RR Donnelley (RRD) Yield: 10%

RR Donnelley is North America's largest commercial printer, with sales approaching $11 billion a year. Commercial printers are out of favor with investors because of the rise of desktop publishing and e-books.

Donnelly is countering weakening demand for printed materials with various digital initiatives. The company recently acquired EDGAR Online, a provider of financial data and analytics to professional investors. In addition, Donnelley is entering new higher-growth areas such as digital-book distribution for e-readers.

Donnelley's earnings per share (EPS) improved 33% to 44 cents in the first quarter of 2012 from 33 cents a year earlier. The company's mid-point for full-year 2012 earnings guidance is $1.88, up 3% from $1.82 one year ago.

Recent customers include AT&T (T), Verizon (VZ) and Office Depot (ODP). Though they bode well for future earnings, Donnelley shares have fallen nearly 44% in the past 12 months.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
YHOO $44.13 -0.69%
AAPL $124.25 -0.14%
FB $81.66 -0.68%
GOOG $542.45 -1.00%
TSLA $187.51 -0.67%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs