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4 High Earnings Yield Stocks to Enhance Your Portfolio

For smart investors who are willing to invest their money either in bonds or stocks, information on certain financial parameters is crucial. One such important parameter is earnings yield. It is the inverse of the price-to-earnings (P/E) ratio. This ratio is very useful in figuring out undervalued stocks. It can also come in handy while comparing stocks with the market or fixed income securities.

Earnings yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing stocks coming from the same sector or industry, the one with higher earnings yield is likely to fetch better returns.

For comparing the performance of a market index with the 10-year Treasury yield, this ratio is very useful. 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 indicates that investing in the stock market is a better option for a value investor.

Though Treasury-bill investments are risk free, investing in stocks always comes with a caveat. Hence, it is a good 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 9% 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 11 stocks that made it through the screen:

Irving, TX-based Nexstar Media Group, Inc. NXST is a television broadcasting and digital media company in the United States. It has a Zacks Rank #1 and an expected EPS growth rate of 6.5% for the next 3–5 years.

Boise, ID-based Micron Technology, Inc. MU is a semiconductor systems provider. It has a Zacks Rank #1 and an expected EPS growth rate of 10% for the next 3–5 years.

Zurich, Switzerland-based UBS Group AG UBS is engaged in providing financial advice and solutions to clients worldwide. It has a Zacks Rank #2 and an expected EPS growth rate of 12.4% for the next 3–5 years.

Atlanta, GA-based Gray Television, Inc. GTN is a television broadcast company, which owns and operates television stations and digital assets in the United States. It has a Zacks Rank #2 and an expected EPS growth rate of 6.5% 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.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

https://woas.zacks.com/zcom/researchwizard/tools3.php?site=Z...">Click here to sign up for a free trial to the Research Wizard today.

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: http://www.zacks.com/performance">https://www.zacks.com/performance.

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UBS AG (UBS): Free Stock Analysis Report
 
Gray Television, Inc. (GTN): Free Stock Analysis Report
 
Nexstar Broadcasting Group, Inc. (NXST): Free Stock Analysis Report
 
Micron Technology, Inc. (MU): Free Stock Analysis Report
 
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