Value Stocks for April 2017
There are many different ways to determine if a stock should be added to your investment portfolio. One option is value investing, the concept of which is buying a low-risk investment with high investment return potential. This article will go thorough best value stocks for April 2017 that you may wish to consider buying.
Why Invest in Value Stocks?
Value investing is investing in companies that have strong earnings, cash flow, and financial statements. The company is also selling at a discount compared to its industry peers. Potential reasons include a lack of investor awareness and the focus being on other sectors in the marketplace.
Since value stocks are trading at a discount, it means that the company is under-owned by the markets. A forward-looking and contrarian view on a company well serves its potential for market-beating returns while not taking a lot of investment risk.
As time passes, a value investor comes to assume that a company will be trading in line or above its peers. This is why this concept of investing requires patience and a strong belief in the investment.
How to Choose Value Stocks
Value investing is not looking at a group of stocks and picking the lowest-priced one to add to your portfolio. Rather, this strategy requires looking at the fundamentals of a company and then making a comparison against others in the industry.
First, consider what market size you’re comfortable with and if you want to receive income for your time in the investment via a dividend.
Next, pick the actual stocks. An easy way to choose value stocks is by using the price-to-earnings (P/E) earnings of a company. This is a ratio that takes the current share price of a company and divides it by its annual earnings. The lower the ratio it is better from an investor’s point of view as long as there is future growth.
Once you determine the sector to invest in, the industry P/E will be used as the benchmark. The companies that trade below the industry average would be trading at a discount.
Following this, research the potential investment to estimate future growth in revenue and earnings. This is what will push the P/E higher over time. If there is no future growth, the stock will continue to trade at a discount.
Then, once a company has been chosen as a potential investment, go over it in more depth. Take a look at the history of dividend hikes and share repurchases. Also keep in mind how the company’s earnings are being reported; are they flat, down, or growing?
Finally, once satisfied, complete the actual purchase of the shares.
Below is a list of the best value stocks for April 2017. All of them pay a dividend, so investors will be rewarded for their time.
List of Value Stocks for April
| Company Name | Stock Symbol | Price | Dividend Yield | Price-to-Earnings (P/E) Ratio |
| Air Lease Corporation | AL | $38.36 | 0.78% | 11.1 |
| Brookfield Property Partners LP | BPY | $21.90 | 5.39% | 9.8 |
| Target Corporation | TGT | $53.60 | 4.48% | 11.6 |
| Medical Properties Trust Inc. | MPW | $12.74 | 7.53% | 14.3 |
| T.Rowe Price Group Inc. | TROW | $68.39 | 3.33% | 14.3 |
| Tupperware Brands Corporation | TUP | $62.56 | 4.35% | 14.1 |
| American Airlines Group Inc. | AAL | $42.60 | 0.94% | 8.9 |
1. Air Lease Corp
Air Lease Corp (NYSE:AL) has a very simple business model, purchasing new commercial jet transport aircraft and leasing them to airline companies. The aircraft are purchased from Boeing Co (NYSE:BA) and Airbus Group SE (EPA:AIR). (Source: “Single Aisle Aircraft,” Air Lease Corp, last accessed March 28, 2017.)
There are a total of 39 customers across 33 countries which adds to the diversification of its customer base and its global presence. Some of the customers include: Southwest Airlines Co (NYSE:LUV), American Airlines Group Inc (NASDAQ:AAL) and United Continental Holdings Inc (NYSE:UAL). (Source: “Customers,” Air Lease Corp, last accessed March 28, 2017.)
This business concept of air leasing works for airlines because it needs less cash and financing capital. This gives airlines the ability to use their capital for other uses, such as for reinvestment into the business. Another reason why airlines really like leasing aircraft is because there is no residual value risk, with the planes salvaged after there is no more use for them.
When it comes to the financial statements, AL stock has a lot of positives. Over the past five years, the company’s assets have doubled, helping to generate a 30% compound annual return. Margins have also been on an upward trend. This has helped pay a steady dividend, which has increased by 200% over the past five years. (Source: “Q4 2016 Investor Presentaton,” Air Lease Corporation, February 23, 2017.)
AL stock would be labelled as both a growth stock because of the double-digit revenue growth and a value stock because its P/E is trading a third lower then the industry average.
2. Brookfield Property Partners LP
Brookfield Property Partners LP (NYSE:BPY) is the owner and operator of various properties which include: office, retail, industrial and multifamily residence. The properties are primarily located in North America, Europe, and Australia, with a small presence in Brazil, China, and India.
BPY stock is one the best value stocks to consider buying, the first reason being its P/E ratio of 9.8 times, compared to the industry average of 43.3 times. Therefore, BPY stock is trading at approximately 22% of the value of its peers.
Given the positive financials, I believe the market is simply unaware of the investment opportunity that BPY stock presents. For instance, revenue over the past five years has been steady and growing, nearly doubling over this period. And since Brookfield is in real estate, debt is used to grow the business, as is the norm for the sector. Last quarter, seven properties were refinanced at a lower interest rate when compared to the previous agreements. By simply refinancing, cash flow should increase since there will be less obligation to pay debt.
BPY stock is currently trading at $21.90 and offering a dividend yield of 5.39%. The dividend payment is made on a quarterly basis and is reviewed annually in February. The company, believing shares to be undervalued, has also been engaged in share buybacks. (Source: “Brookfield Property Partners Reports Fourth Quarter & Full-Year 2016 Results,” Brookfield Property Partners LP, February 3, 2017)
3. Target Corporation
Target Corporation (NYSE:TGT) is one of the largest retailers in the U.S.
The company’s sales continue to grow each year, even during the most recession in 2009. A major reason for this is that Target sells consumer staples and discretionary products.
Consumer staples, products essential to everyday living, sell in both in good and bad economic times. These include goods such as food, beverages, and household products. Consumer staples make up the majority of items sold in Target stores.
Discretionary products are essentially everything else, such as apparel and items related to entertainment and leisure. These type of products are growth drivers for Target since they perform well in a booming economy.
Target is a part of the S&P 500 Dividend Aristocrat Index. In order to be part of this index, a company must be a Fortune 500 company that pays a dividend that has grown for at least 25 consecutive years (Target is currently at 49).
Shareholders have also benefited from share buybacks. Last year, Target’s board of directors signed off on a $5.0-billion share repurchase program–a tax-efficient method of rewarding the shareholder base. (Source: “Target Corporation Announces New $5 Billion Share Repurchase Program and Declares Regular Quarterly Dividend,” Target Corporation, September 21, 2016.)
4. Medical Properties Trust Inc.
Medical Properties Trust Inc. (NYSE:MPW) is engaged in acquiring and developing healthcare facilities. The types of properties include acute care hospitals, impatient rehabilitation facilities, medical offices, and free-standing emergency rooms.
This is a great market segment to think about making an investment into because there will be more demand for these types of properties in the future. The United States Census Bureau is predicting that people age 65 or over will account for more than 20% of the population in the U.S. by 2050, nearly double the current amount. This segment of the real estate market is also protected against a recession, as there will always be demand for healthcare facilities, no matter how the economy is performing. (Source: “An Aging Nation: The Older Population in the United States,” United States Census Bureau, last accessed March 28, 2017.)
MPW stock’s dividend yield is 7.53%, based on a trading price of $12.74. Even though the yield is high, MPW stock also enjoys dividend growth. The dividend policy is reviewed in February of each year.
5. T. Rowe Price Group Inc
T. Rowe Price Group Inc (NASDAQ:TROW) is a financial company with a presence in more than 40 countries around the world. Its services include managing of clients’ personal wealth and various mutual funds, as well as sub-advisory services.
TROW stock is one of the best value stocks to buy in April for three reasons. The first comes down to valuation; TROW stock has a P/E ratio of 14.2 times, which is 40% lower than the industry average of 23.3 times.
The second reason would be T. Rowe’s strong financial position, both in terms of assets and debt. Currently, 10% of the market cap of the company is sitting in cash. Meanwhile, on the debt side of things, no money is being borrowed to pay for business expenses and/or growth. In fact, T. Rowe being debt-free is a rarity for its industry, with all growth coming organically by growing the amount of assets being managed. (Source:”T. Rowe Price Group Inc.,” MarketWatch, last accessed March 28, 2017.)
The third reason would be the dividend. Paid out on a quarterly basis and seeing annual growth, TROW stock’s enjoying a dividend increase streak of 30 years. And with a solid balance sheet, there is the possibility of continuing to see this streak continue.
6. Tupperware Brands Corporation
Tupperware Brands Corporation (NYSE:TUP) is a global company which sells cosmetics, personal care products, and goods for food storage and serving.
Tupperware rewards its shareholders in two ways: a dividend payment and share buybacks. The dividend yield currently is 4.36%, going by the current trading price of $62.39. The dividend payment is a steady one that also sees growth.
Shares being repurchased does not add more money into investors’ pockets, but rather affects investor’s ownership steak. As Tupperware purchases more shares, the remaining ones become worth more of the business, supporting the share price because there is consistent buying. At present, there is a $2.0-billion share repurchase program in place, with $736.0 million still remaining. (Source: “Tupperware Brands Reports Fourth Quarter 2016 EPS Above High End of Guidance, Declares Regular Quarterly Dividend,” Tupperware Brands Corporation, February 1, 2017.)
7. American Airlines Group Inc
American Airlines Group Inc (NYSE:AAL) provides air transport for passengers and cargo. More than 50 countries are included on the list of American Airlines’ potential destinations.
Having a large network, as American Airlines does, comes with many advantages. There are virtually no new companies that would operate in the same market segment, due to the capital required, protecting its market share. It also reflects well on AAL stock as a potential investment, since it protects the profits of the company. The evidence is the annual revenue, which is up more than 60% over the past five years. (Source: “American Airlines Group Inc.,” MarketWatch, last accessed March 28, 2017.)
AAL stock currently pays a dividend of $0.40 per share annually. There is plenty of room to grow due to the steady revenue and very modest payout ratio of eight percent.