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4 High Earnings Yield Stocks to Scoop Up Right Away

For investors with exposure to stocks as well as bonds, Earnings Yield may be a simple yet effective metric to use. The ratio is the inverse of the price-to-earnings (P/E) ratio, which is commonly applied to find undervalued stocks. However, when one looks to compare stocks with fixed income securities or the market, earnings yield is a more apt ratio.

Earnings Yield is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing similar stocks, the one with the higher earnings yield is likely to provide better returns, other factors remaining constant.

Moreover, Earnings Yield can be used to compare the performance of a market index with the 10-year Treasury yield. When the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued in comparison to bonds and vice versa. In such a situation, investing in the stock market is a better option than in the bond market for a value investor.

However, it is important to remember that T-bills are risk free, while stock investments come with a caveat. It would be a good idea to add a risk premium to the Treasury yield while comparing it with earnings yield of a stock or the overall market.

The Winning Strategy

We have set Earnings Yield greater than 10% 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.

Here are four of the 8 stocks that made it through the screen:

Western Digital CorporationWDC designs, develops, manufactures and markets a broad line of hard drives featuring leading-edge technology. The company sports a Zacks Rank #1 and its expected EPS growth rate for the next 3-5 years is 5.7%.

Deutsche Bank AGDB is the largest bank in Germany and one of the largest financial institutions in Europe and the world, as measured by total assets. This Zacks Rank #1 stock has an expected EPS growth rate of 43.9% for the next 3-5 years.You can see the complete list of today's Zacks #1 Rank stocks here .

Volkswagen AktiengesellschaftVLKAY is the largest automobile manufacturer in Europe. The company has nine independent brands that offer a unique range of vehicles. The company's activities focus on the automotive market and they offer products and services along the entire automotive value chain. This Zacks Rank #1 company has an expected EPS growth rate of 27.2% for the next 3-5 years.

Cosan LimitedCZZ was established as the controlling shareholder of Cosan S.A., a Brazilian company, after the corporate restructuring of the Cosan Group in Brazil. Cosan Limited currently holds roughly 62.3% of the controlling shares of Cosan S.A., which is engaged in the cultivation, harvesting and processing of sugarcane.This Zacks Rank #2 company has an expected EPS growth rate of 16.3% 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.

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:https://www.zacks.com/performance.

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Western Digital Corporation (WDC): Free Stock Analysis Report

Volkswagen AG (VLKAY): Free Stock Analysis Report

Deutsche Bank AG (DB): Free Stock Analysis Report

Cosan Limited (CZZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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