JEF - 6 Undervalued Financial Stocks to Buy Now
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These undervalued financial stocks are worth buying now. They all trade with low price/book value and/or have very low price-to-earnings (P/E) multiples. In addition, these financial stocks tend to have ample dividends and good dividend yields, which can be paid for by the company’s earnings.
These companies may be facing issues with lower earnings forecasts. That may even be likely, now that the U.S. economy is increasingly looking to be in a recession.
That is what makes the stock look so cheap. But as long as the company will be able to cover its dividend, we can assume that its historical dividend yield will be an anchor to the company’s valuation. The same can be said for its historical price-to-book value (P/BV), or its price-to-tangible book value (P/TBV) multiples.
Let’s dive in and look at these financial stocks.
AIGAmerican International Group$55.88CCitigroup$49.97JEFJefferies Financial Group$30.10COWNCowen$25.04IVZInvesco$18.06AINVApollo Investment Corp$12American International Group (AIG)
Dividend Yield: 2.2%
American International Group (NYSE:AIG) is a sophisticated multi-line and property and casualty insurer based in New York City, N.Y.
AIG stock looks very cheap now. For one, it is still in a growth mode but its valuation is very low.
For example, AIG is forecast to produce 3.3% higher earnings per share (EPS) this year at $5.29, and 20% higher next year at $6.34. So at its June 9 close of $55.88 per share, AIG stock has a low 2022 multiple of 10.6x and 8.8x for 2023.
Moreover the stock has a dividend yield of 2.2% with its $1.28 annual dividend payment. It has made the same dividend payment since 2016.
One last reason why this stock looks cheap? It is trading at about 84% of its common stock book value. For example, the book value was $55.459 billion as of March 31, but its market value is $46.7 billion. After deducting intangible assets of $4.356 billion, the tangible book value is $51.1 billion. That is still greater than its market value, giving it a P/TBV multiple of 0.91x. That implies that the company is too cheap now.
Citigroup (C)
Dividend Yield: 4%
Citigroup (NYSE:C) is fast becoming a favorite of value investors. The point is that at $49.97, as of the close on June 9, the stock was trading for just 63% of its tangible book value per share (TBVPS) of $79.03.
That TBVPS figure is displayed on page 3 of Citigroup’s Q1 earnings presentation. It implies that if all the assets were liquidated there would produce an ROI of 58.15% (i.e., $79.03/$49.97 -1).
Moreover, the other valuation measures at Citigroup are cheap as well. The 2022 P/E is 7.3x and for 2023 it’s just 6.8x. That is very cheap indeed.
On top of that, the annual $2.04 dividend is more than covered by the $6.85 EPS forecast for 2022. That gives the stock a dividend yield of 4%. That ensures that investors receive income to wait while the stock moves to a higher level. This makes this a one of the worthwhile financial stocks.
Jefferies Financial Group (JEF)
Dividend Yield: 3.8%
NYC investment bank Jefferies Financial Group (NYSE:JEF) trades below book value. Its tangible book value per share is $35.79, according to Seeking Alpha. So at $30.10 on June 9, the P/TBVPS is 0.84x.
That implies that if the company was liquidated the potential ROI would be 19% (i.e., 1/0.84x – 1).
The stock is also cheap on a forward P/E basis. Its 2022 multiple is just 8.7x and it’s at 7.5x for 2023. In addition, the stock yields 3.8% with a dividend that earnings can afford to cover. For example, the annual dividend is $1.20 and the 2022 forecast earnings are much higher at $3.48 (and $4 for 2023).
This makes this one of the more attractive financial stocks.
Cowen (COWN)
Dividend Yield: 1.9%
Cowen (NASDAQ:COWN) is a New York City-based investment banking firm with good earnings prospects and a cheap valuation. For example, its TBVPS is $24.67, which is right below the stock price of $25.04, as of the close on June 9.
Moreover, the investment bank is forecast to show earnings growth next year of 29.8% to $5.83. That puts COWN stock on a forward P/E of just 4.3x.
And with the 48-cent annual dividend, COWN stock yields 1.9%. This makes it one of the most valuable financial stocks.
Invesco (IVZ)
Dividend Yield: 4.1%
Invesco Ltd. (NYSE:IVZ) is a very attractive investment management stock. The company produces fees from assets under management, rather than from a spread like banks.
Moreover, the stock is now very cheap. It trades on a forward multiple of just 7.2x 2022 EPS and 6.4x 2023 earnings. This also implies that earnings will grow 11.1% in 2023 over 2022.
On top of this, the stock has an attractive dividend yield of 4.1% based on its annual 75-cent dividend payment. This is well-covered by the 2022 EPS estimate of $2.52 per share.
This makes IVZ stock one of the cheap financial stocks to own doing forward.
Apollo Investment Corp (AINV)
Dividend Yield: 10.2%
Apollo Investment Corp (NYSE:AINV), a closed-end fund, now is now trading well below its net asset value (NAV) of $15.79 as of the end of March. That is significantly higher than its price as of the close June 9 of $12.
This implies that the stock has a potential ROI on liquidation of 31%.
The NAV has more or less stayed flat over the past year as last year its NAV was $15.88 per share and now this past quarter it was at $15.79. That is quite an achievement, as most other financial assets have fallen quite dramatically.
One reason for this is that the company invests in corporate debt on a first and second lien secured basis. This means it has plenty of financial income coming through the door to cover its $1.24 dividend distribution. Its annual yield stands at 10.2%.
Moreover, based on analysts’ projections, the stock trades on a forward P/E of just 8.6x for 2022 and 8.4x for 2023.
Therefore, its high yield, low valuation, and below-NAV price all make AINV stock one of the most attractive financial stocks on this list.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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