A screen for Russell 2000 stocks with low price/earnings ratio and which pay a dividend of greater than 3% reveals plenty of regional banks and a few others. This, at a time when the hottest stock in the world, NVIDIA
NVDA
DIA
, trades with a p/e of 226 and Tesla
TSLA
with a p/e of 77. They might be pushing the valuation envelope.
Here are 4 small caps that fit the kind of value stock scenario favored by Warren Buffett’s mentor Benjamin Graham, the author of The Intelligent Investor and Security Analysis. You won’t hear these mentioned on CNBC very often but that’s probably a good thing.
Low P/E Value Small Caps With 3+% Dividends
Associated Ban-Corp is a regional banking stock with headquarters in Green Bay and hundreds of locations in Wisconsin, Illinois and Minnesota. Along with many others in the sector, following the collapse of Silicon Valley Bank, price tanked in March, April and May — then gained strength again during the summer months.
It trades with a price-earnings ratio of 7.59 and at just 73% of its book value. This year’s earnings per share are up by 7% and the record over the past 5 years comes in at 9.20%. Long-term debt is 14% of shareholder equity, a low figure for that metric. Associate Banc-Corp pays a dividend of 4.37%.
Foot Locker is a retail equity that peaked in March, 2021 at $60 and has fallen since then to its present $25.34. That’s quite a drop when you consider that the Standard & Poor’s 500 and the NASDAQ
NDAQ
-100 have recently come back strong and now approach their all time highs.
Has the shoe store dropped enough to make a value stock? Maybe. Now available for purchase at a 25% discount to its book value and trading with a price-earnings ratio of 10, researchers with “cheap” on mind may be looking at it. EPS is off by 58% this year and up by 3.80% for the past 5 years. Foot Locker pays a 6.09% dividend.
Golden Ocean Group is a marine shipping stock headquartered in Bermuda and refers to itself as “one of the world’s leading dry bulk shipping companies.” The price of a share has dropped from a June, 2022 peak of $14 to the recent $7.50, almost a 50% slide.
The price-earnings ratio is quite low at 4.53 (the Shiller p/e for the S&P 500 sits at 31.94). The stock trades at 91% of book value. This year’s earnings per share are off by 16% and for the past 5 years they’re up by 162%. Golden Ocean Group pays a dividend of 5.17%.
Hersha Hospitality Trust
HT
traded at $9.40 in December, 2022 and now goes for $6.07. The hotel and motel real estate investment trust shows earnings per share this year up by 284% and over the past 5 years up by 12.10%. Long-term debt just about equals shareholder equity.
With a price-earnings ratio of just 1.99, it’s obviously widely disfavored. The REIT goes for a mere 31% of its book value. In May, 2023, B. Riley Secuities moved their rating on Hersha from “neutral” to “buy” with a price target of $10 to $9. In July, 2023, Oppenheimer downgraded it from “outperform” to “perform.” The dividend is 3.20%.
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