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3 High Return Non-Cyclical Stocks for the Value Investor

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·4 min read
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- By Alberto Abaterusso

If you are looking for high return investments, you could be interested in the three non-cyclical stocks listed below, as their earnings yields (as calculated via Joel Greenblatt (Trades, Portfolio)'s method) are beating the U.S. market.


Greenblatt calculates the earnings yield as the company's earnings before interest and tax (Ebit) divided by its enterprise value. This ratio represents a more reliable reference for the assessment of non-cyclical stocks, whose earnings have little or no correlation with the business cycle (as the metric only looks at 12 months of operating activities).

As of the writing of this article, the S&P 500's historical high earnings yield was 9.5%. The following stocks are doing better than the S&P 500 in terms of a higher earnings yield.

British American Tobacco PLC

The first stock to consider is British American Tobacco PLC (NYSE:BTI), a London, United Kingdom-based tobacco giant.

The stock grants an earnings yield of 10.02% as of the December 2020 quarter. This stands above the median point of the past 10-year historical earnings yield range of 5.67% to 30.05%. British American Tobacco PLC's earnings yield ranks higher than 71% of 42 companies that are operating in the tobacco products industry.

The share price traded at around $39.55 at close on Wednesday for a market capitalization of $90.74 billion and a 52-week range of $31.60 to $41.58. The stock has risen 17% over the past year.

3 High Return Non-Cyclical Stocks for the Value Investor
3 High Return Non-Cyclical Stocks for the Value Investor

Its price-earnings ratio is 10.22 and the price-book ratio is 1.04.

Currently, British American Tobacco PLC pays quarterly dividends. The next one, 74.6 cents per common share, will be paid on May 17, generating a forward dividend yield of 7.56% as of March 24.

On Wall Street, as of March, the stock has a median recommendation rating of overweight with an average target price of about $37.97 per share.

Among the top fund holders of the company, Orbis Allan Gray Ltd is the leader with 0.88% of shares outstanding. It is followed by FMR LLC and Capital Research Global Investors, owning 0.48% and 0.42%, respectively.

Cigna Corp

The second stock to consider is Cigna Corp (NYSE:CI), a Bloomfield, Connecticut-based healthcare plans company.

The company grants an earnings yield of 12.74% as of the December 2020 quarter. Cigna Corp's current earnings yield stands significantly above the median point of the 10-year historical range of 2.55% to 18.74% and ranks higher than 79% of the 19 companies that are operating in the healthcare plans industry.

The share price was trading at around $240.54 at close on Wednesday for a market capitalization of $83.56 billion and a 52-week range of $154.41 to $248.39. The stock has risen by 42% over the past year.

3 High Return Non-Cyclical Stocks for the Value Investor
3 High Return Non-Cyclical Stocks for the Value Investor

Its price-earnings ratio is 10.49 and the price-book ratio is 1.69.

On March 25, a quarterly dividend of $1 per share was paid, generating a forward dividend yield of 1.69% based on the share price from the chart above.

On Wall Street, as of March, the stock has a median recommendation rating of buy with an average target price of $265.91 per share.

Price T Rowe Associates Inc /md/ leads the group of top fund holders of the company, owning 8.52% of shares outstanding. It is followed by Vanguard Group Inc with 7.93% of shares outstanding and BlackRock Inc. with 7.74% of shares outstanding.

Molina Healthcare Inc

The third stock to consider is Molina Healthcare Inc (NYSE:MOH), a Long Beach, California-based healthcare plans company.

The company grants an earnings yield of 11.98% as of the December 2020 quarter. Currently, Molina Healthcare Inc's earnings yield stands below the median point of the 10-year historical range of negative 3,220.2% to 10,805.56%, ranking, however, higher than 74% of companies that are operating in the healthcare plans industry.

The share price traded at $235.10 at close on Wednesday for a market capitalization of $13.73 billion and a 52-week range of $127.56 to $246.72. The stock has risen by 68% over the past year.

3 High Return Non-Cyclical Stocks for the Value Investor
3 High Return Non-Cyclical Stocks for the Value Investor

Its price-earnings ratio is 20.93 and the price-book ratio is 6.62.

Currently, Molina Healthcare Inc does not pay dividends.

On Wall Street, as of March, the stock has a median recommendation rating of overweight with an average target price of $245.85 per share.

Capital World Investors dominates in the group of top fund holders of the company with 9.97% of shares outstanding. It is followed by BlackRock Inc. with 9.40% of shares outstanding and Vanguard Group Inc with 9.22% of shares outstanding.

Disclosure: I have no position in any security mentioned.

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This article first appeared on GuruFocus.