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A Trio of High Return Non-Cyclical Stocks to Consider

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GuruFocus.com
·5 min read
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- By Alberto Abaterusso

If in search of high return investments, investors may 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 average of the S&P 500 stocks.


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 appraisal of non-cyclical stocks, whose earnings have little or no correlation with the business cycle (as the metric only looks at 12 months of operations).

As of the writing of this article, the S&P 500's mean historical earnings yield is 9.5%. The following stocks are surpassing the S&P 500 in terms of a higher earnings yield.

PT Telekomunikasi Indonesia (Persero) Tbk

The first stock to consider is PT Telekomunikasi Indonesia (Persero) Tbk (NYSE:TLK), an Indonesian global provider of telecommunication services.

The stock grants an earnings yield of 13.59% as of the most recent quarter that ended in September 2020. This stands above the median point of the 10-year historical earnings yield range of 8.5% to 16.2%. PT Telekomunikasi's earnings yield ranks higher than 84% of 411 companies that are operating in the telecommunication services industry.

The share price traded at around $24.73 at close on Wednesday for a market capitalization of $24.50 billion and a 52-week range of $16.06 to $26.88. The stock has fallen 2.33% over the past year.

A Trio of High Return Non-Cyclical Stocks to Consider
A Trio of High Return Non-Cyclical Stocks to Consider

Its price-earnings ratio is 17.87 and the price-book ratio is 3.39.

Currently, PT Telekomunikasi pays dividends. In 2020, the telecommunication services company paid an annual dividend of 79.2 cents per common share for trailing 12-month and forward dividend yields of 3.2% as of Feb. 24.

On Wall Street, as of February, the stock has a median recommendation rating of buy with an average target price of about $29.41 per share.

Among the top fund holders of the company, Lazard Asset Management LLC is the leader with 1.54% of shares outstanding. It is followed by Jim Simons (Trades, Portfolio) and Wells Fargo & Company/mn, holding 0.52% and 0.37% of shares outstanding, respectively.

Frontline Ltd

The second stock to consider is Frontline Ltd (NYSE:FRO), a Hamilton, Bermuda-based operator of oil and product tankers for the seaborne transportation of crude oil and oil products worldwide.

The company grants an earnings yield of 18.45% as of the most recent quarter that ended in September 2020. Frontline Ltd.'s current earnings yield stands significantly above the median point of the 10-year historical range of -19.6% to 35.4% and ranks higher than 93% of the 1,203 companies that are operating in the oil and gas industry.

The share price was trading at around $6.98 at close on Wednesday for a market capitalization of $1.38 billion and a 52-week range of $5.28 to $11.95. The stock has declined by 4.64% over the past year.

A Trio of High Return Non-Cyclical Stocks to Consider
A Trio of High Return Non-Cyclical Stocks to Consider

Its price-earnings ratio is 3.06 and the price-book ratio is 0.85.

Currently, Frontline Ltd pays quarterly dividends to its shareholders with the last distribution, 50 cents per common share (down 20 cents from the previous one), made on Sept. 29, 2020. The stock grants a trailing 12-month dividend yield of 22.92% and a forward dividend yield of 28.65% as of Feb. 24.

On Wall Street, as of February, the stock has a median recommendation rating of hold with an average target price of $7.22 per share.

Folketrygdfondet leads the group of top fund holders of the company, owning 4.97% of shares outstanding. It is followed by BlackRock Inc. with 2.96% of shares outstanding and Vanguard Group Inc with 1.55% of shares outstanding.

Louisiana-Pacific Corp

The third stock to consider is Louisiana-Pacific Corp (NYSE:LPX), a Nashville, Tennessee-based manufacturer of building materials and equipment that are mainly used to construct, repair and restyle residential buildings and to realize outdoor architectures.

The company grants an earnings yield of 16.37% as of the most recent quarter that ended in December 2020. Currently, Louisiana-Pacific's earnings yield stands far above the median point of the 10-year historical range of -9.5% to 27.4% and ranks higher than 75% of 1,551 companies that are operating in the construction industry.

The share price traded at $47.78 at close on Wednesday for a market capitalization of $5.09 billion and a 52-week range of $12.97 to $48.79. The stock has risen by 55.13% over the past year.

A Trio of High Return Non-Cyclical Stocks to Consider
A Trio of High Return Non-Cyclical Stocks to Consider

Its price-earnings ratio is 6.20 and the price-book ratio is 1.18.

Currently, Louisiana-Pacific pays quarterly dividends. The last payment, 14.5 cents per common share, was made last year on Dec. 1, while the next payment of 16 cents per common share will be made on March 8, for a trailing 12-month dividend yield of 1.25% and a forward dividend yield of 1.34% as of Feb. 24.

On Wall Street, as of February, the stock has a median recommendation rating of overweight with an average target price of $52.25 per share.

BlackRock Inc. leads the group of top fund holders of the company with 11.64% of shares outstanding. It is followed by Vanguard Group Inc with 10.66% of shares outstanding and Wellington Management Group LLP with 6.20% of shares outstanding.

Disclosure: I have no position in any security mentioned.

Read more here:

  • 3 Stocks Trading Below the Peter Lynch Fair Value

  • 3 High-Return Stock Picks

  • A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks



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This article first appeared on GuruFocus.