Serious Money: Still Cheap Market -- 35 Stocks + Yields & Growth

We initiated our stock screen for cheap stocks by identifying low P/E ratios. The following stock figures indicate the the results for yield and PEG ratios, listing them from best to worst.

Stocks Yields:

1. Altria Group (MO) Yield 6.9%
2. Verizon (VZ) Yield 6.26%
3. Bristol-Myers Squibb (BMY) Yield 5.2%
4. duPont (E.I.) deNemours (DD) Yield 5.05%
5. Xcel Energy (XEL) Yield 4.7%
6. American Electric Power (AEP) Yield 4.63%
7. Pfizer (PFE) Yield 4.22%
8. Kimberly-Clark (KMB) Yield 3.98%
9. ConocoPhillips (COP) Yield 3.95%
10. Merck and Co (MRK) Yield 3.91%
11. Chevron Corp (CVX) Yield 3.65%
12. Sysco (SYY) Yield 3.64%
13. Lockheed Martin (LMT) Yield 3.33%
14. Johnson and Johnson (JNJ) Yield 3.10%
15. Campbell Soup (CPB) Yield 3.05%
16. Abbott Laboratories (ABT) Yield 2.94%
17. Chubb Corp (CB) Yield 2.92%
18. Darden Restaurants (DRI) Yield 2.77%
19. Travelers Companies Inc. (TRV) Yield 2.73%
20. Hasbro (HAS) Yield 2.56%
21. General Mills (GIS) Yield 2.54%
22. Raytheon (RTN) Yield 2.34%
23. AFLAC Inc (AFL) Yield 2.28%
24. Wal-Mart (WMT) Yield 2.06%
25. Archer-Daniels-Midland (ADM) Yield 1.84%
26. International Business Machines (IBM) Yield 1.75%
27. CVS Corp (CVS) Yield 1.05%
28. Goldman Sachs Group (GS) Yield 0.91%
29. Noble Corp (NE) Yield 0.91%
30. Hewlett-Packard (HPQ) Yield 0.65%
31. JPMorgan Chase (JPM) Yield 0.51%
32. United Health (UNH) Yield 0.09%
33. Autozone (AZO) Yield 0%
34. eBay (EBAY) Yield 0%
35. EZ Corp (EZPW) Yield 0%

From a yield perspective I would probably shun the nine stocks under IBM paying little or nothing. However, I rarely base a decision on a single criteria.

Price-to-Earnings-to-Growth (PEG)

1. Goldman Sachs Group (GS) 0.47
2. EZ Corp (EZPW) 0.65
3. Noble Corp (NE) 0.67
4. AFLAC Inc (AFL) 0.71
5. Autozone (AZO) 0.86
6. CVS Corp (CVS) 0.92
7. eBay (EBAY) 0.93
8. Sysco (SYY) 0.93
9. Kimberly-Clark (KMB) 1.0
10. Abbott Laboratories (ABT) 1.07
    
11. Chubb Corp (CB) 1.07
12. Darden Restaurants (DRI) 1.08
13. Archer-Daniels-Midland (ADM) 1.1
14. Lockheed Martin (LMT) 1.1
15. Wal-Mart (WMT) 1.1
16. International Business Machines (IBM) 1.11
17. Raytheon (RTN) 1.11
18. United Health (UNH) 1.11
19. Hewlett-Packard (HPQ) 1.12
20. Travelers Companies Inc. (TRV) 1.22
21. Altria Group (MO) 1.38
22. Campbell Soup (CPB) 1.4
23. Hasbro (HAS) 1.4
24. duPont (E.I.) deNemours (DD) 1.41
25. JPMorgan Chase (JPM) 1.5
26. General Mills (GIS) 1.55
27. Johnson and Johnson (JNJ) 1.72
28. Xcel Energy (XEL) 1.87
29. Merck and Co (MRK) 2.40
30. Verizon (VZ) 2.45
    
31. Bristol-Myers Squibb (BMY) 4.07
    
32. Pfizer (PFE) 5.76
33. American Electric Power (AEP) -1.36
34. ConocoPhillips (COP) -1.47
    
35. Chevron Corp (CVX) -9.60

Here again the breaking point for me was at number 26, General Mills. My preference is to be under 1.0 or close to it considering other factors.

Historically there has been a relationship between stock yields and growth which seems to be supported by these two screens. The stocks with the worst yields generally have the best growth and vice versa. The nine worst yields all have respectable PEG ratios. JPM had the worst combined showing because it slashed it's dividend in 2008. This is highly probable to see an increase sometime later this year.

For now I'm not going to cut any of the 35. While I think all of these stocks merit further analysis there are standouts. Kimberly-Clark, (ranked 8 & 9), Sysco (ranked 12 & 8) and Lockheed Martin (ranked 13 & 14) all have generous yields exceeding 3% and PEG's around 1.0. Sysco is actually my latest purchase.

In my next review I will address price-to-sales (P/S) and price-to-cashflow (P/CF). Three of these stocks ADM, EZPW and RTN were included among the Chasing Value: 10 Stock Picks for 2010.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: Among the positions discussed in this post I own shares of ADM, EZPW, JNJ, MRK, RTN and SYY..