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Top 10 Magic Formula Stocks by Dividend Yield, Low P/S and P/B Ratio

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July 19, 2011 – Comments (0) | RELATED TICKERS: GME , LMT , AMED

Every so often, MagicDiligence compiles a list of Magic Formula stocks sorted by their dividend yield, price-to-sales ratio, and price-to-book ratio for investors that like to use those metrics. Magic Formula Investing screens by a combination of high earnings yield and return on capital, aiming to find "great companies at cheap prices". By combining traditional value metrics, the result is a list of attractive value stocks for additional research. Here are the top 10 in each of the three categories listed above:

Dividend Yield

Dividend yield is a favorite metric for income investors, providing both steady, predictable returns and downside protection. With Magic Formula Investing, you are also buying dividend stocks that are both cheap against earnings and represent a company that efficiently invests capital. The Top 10 Magic Formula highest dividend yield stocks (forward yield) right now are:

1) 11.7% - Mind Cti Ltd (MNDO)
2) 11.4% - Great Northern Iron Ore Properties (GNI)
3) 9.6% - Protein Design Labs Inc (PDLI)
4) 6.4% - USA Mobility Inc (USMO)
5) 4.7% - Cherokee, Inc. (CHKE)
6) 4.7% - Lorillard Inc (LO)
7) 4.1% - Deluxe Corp (DLX)
8) 3.9% - Block (H&R) Inc. (HRB)
9) 3.8% - Lockheed Martin Corp (LMT)
10) 3.7% - Raytheon Co. (RTN)

Price-to-Sales Ratio

Using the price-to-sales ratio was a tactic shown to be highly successful by such guru investors as Ken Fisher in Super Stocks and by James O'Shaughnessy in What Works on Wall Street. The Top 10 Magic Formula stocks with lowest price-to-sales ratios are:

1) 0.19 - Providence Service Corp (The) (PRSC)
2) 0.28 - Unisys Corp (UIS)
3) 0.34 - GameStop Corp. (GME)
4) 0.35 - Oshkosh Corp (OSK)
5) 0.37 - EMCOR Group Inc. (EME)
6) 0.49 - Amedisys Inc (AMED)
7) 0.52 - SAIC Inc (SAI)
8) 0.52 - Dell, Inc. (DELL)
9) 0.55 - Northrop Grumman Corp (NOC)
10) 0.57 - Hewlett-Packard Co (HPQ)

Price-to-Book Ratio

Finally, the price-to-book ratio is often considered the "classic" test of value investing: are you buying a company at or less than the net value of its assets? Price-to-book ratio was a favorite of the "father" of value investing, Ben Graham. The top 10 Magic Formula stocks with lowest price-to-book ratio are:

1) 0.87 - Amedisys Inc (AMED)
2) 1.01 - Trimeris Inc (TRMS)
3) 1.11 - Comtech Telecommunications Corp. (CMTL)
4) 1.11 - GameStop Corp. (GME)
5) 1.17 - Tessera Technologies Inc (TSRA)
6) 1.19 - United Online Inc (UNTD)
7) 1.25 - Almost Family Inc (AFAM)
8) 1.36 - Transition Therapeutics Inc (TTHI)
9) 1.43 - SuperGen Inc (SUPG)
10) 1.43 - Argan Inc (AGX)

Disclosure: Steve owns AFAM, TSRA, NOC, DELL, MNDO

 

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