Markets & Finance

Shopping for Value

By Numer de Guia Even after the market downdraft of the past few years, the Standard & Poor's 500-stock index remains in the high end of its historical range based on a number of valuation measures. So value-oriented investors still have to do their homework to find quality stocks on the cheap. We put together this week's screen to lend a hand.

Our starting point was the list of those stocks ranked 5-STARS (buy) by S&P. These are the ones our analysts expect to outperform the overall market over the next six to 12 months.

Now for the value part. We decided to focus on probably the most commonly-used value criteria -- the price-to-earnings ratio (p-e), which, for our purposes, means the stock price's relationship to the current year earnings-per-share estimate. We looked for companies with p-e ratios lower than the average for the S&P 500 (based on Standard & Poor's Core Earnings). All the companies had to have reported positive Core Earnings in the prior 12 months. And one final kicker: Each had to pay a cash dividend.

From the stocks that emerged, we culled the 20 with highest dividend yields. Here they are:

Alltel (AT)

Amsouth (ASO)

Bank of America (BAC)

Banknorth Group (BNK)

Chelsea Property Group (CPG)

Citigroup (C)

City National (CYN)

Clorox (CLX)

Exxon Mobil (XOM)

Hospitality Properties Trust (HPT)

Kraft Foods (KFT)

Leggett & Platt (LEG)

National Commerce Financial (NCF)

Newell Rubbermaid (NWL)

Pepsico (PEP)

Procter & Gamble (PG)

Smucker (J.M.) (SJM)

Total Fina Elf (TOT)

Union Pacific (UNP)

Wilmington Trust (WL) De Guia is a portfolio services analyst for Standard & Poor's

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