6 S&P 500 Dividend Stocks Undervalued By The Graham Number

Looking for stocks trading at attractive prices? Here are some ideas to get you started on your search.

We ran a screen on the S&P 500 for stocks paying dividends above 1% and sustainable payout ratios below 50%. We then screened these stocks for those that appear undervalued relative to the Graham Number.

It is based on a stock’s EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15, and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

 

1. Chevron Corporation (CVX, Earnings, Analysts, Financials): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Market cap at $208.34B, most recent closing price at $106.45. Dividend yield at 3.44%. Diluted TTM earnings per share at 12.19, and a MRQ book value per share value at 67.93, implies a Graham Number fair value = sqrt(22.5*12.19*67.93) = $136.50. Based on the stock’s price at $105.69, this implies a potential upside of 29.15% from current levels.

 

2. The Chubb Corporation (CB, Earnings, Analysts, Financials): Provides property and casualty insurance to businesses and individuals. Market cap at $20.28B, most recent closing price at $77.44. Dividend yield at 2.14%. Diluted TTM earnings per share at 6.89, and a MRQ book value per share value at 60.98, implies a Graham Number fair value = sqrt(22.5*6.89*60.98) = $97.23. Based on the stock’s price at $76.99, this implies a potential upside of 26.29% from current levels.

 

3. AFLAC Inc. (AFL, Earnings, Analysts, Financials): Provides supplemental health and life insurance. Market cap at $25.23B, most recent closing price at $53.80. Dividend yield at 2.65%. Diluted TTM earnings per share at 6.07, and a MRQ book value per share value at 34.1, implies a Graham Number fair value = sqrt(22.5*6.07*34.1) = $68.24. Based on the stock’s price at $52.99, this implies a potential upside of 28.79% from current levels.

 

4. Baker Hughes Incorporated (BHI, Earnings, Analysts, Financials): Supplies wellbore related products, and technology services and systems for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the oil and natural gas industry worldwide. Market cap at $18.46B, most recent closing price at $41.98. Dividend yield at 1.4%. Diluted TTM earnings per share at 3.96, and a MRQ book value per share value at 38.38, implies a Graham Number fair value = sqrt(22.5*3.96*38.38) = $58.48. Based on the stock’s price at $43.15, this implies a potential upside of 35.52% from current levels.

 

5. BB&T Corporation (BBT, Earnings, Analysts, Financials): Operates as the financial holding company for Branch Banking and Trust Company that provides banking and trust services to small and mid-size businesses, public agencies, local governments, and individuals in the United States. Market cap at $19.75B, most recent closing price at $28.23. Dividend yield at 2.87%. Diluted TTM earnings per share at 2.55, and a MRQ book value per share value at 26.88, implies a Graham Number fair value = sqrt(22.5*2.55*26.88) = $39.27. Based on the stock’s price at $28.17, this implies a potential upside of 39.41% from current levels.

 

6. Peabody Energy Corp. (BTU, Earnings, Analysts, Financials): Engages in the exploration, mining, and production of coal. Market cap at $7.07B, most recent closing price at $26.35. Dividend yield at 1.37% Diluted TTM earnings per share at 2.37, and a MRQ book value per share value at 22.16, implies a Graham Number fair value = sqrt(22.5*2.37*22.16) = $34.38. Based on the stock’s price at $25.11, this implies a potential upside of 36.9% from current levels.

 

 

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