3 cunningly cheap companies you need to know

Having the courage to buy out-of-favour stocks can be rewards in the long run.

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Cheap and paying a fully franked dividend yield can be a great combination for investment success provided you add in a healthy dose of patience. These three companies have both of those vital ingredients, except for the patience of course – which an investor must possess.

Southern Cross Media Group Ltd (ASX: SXL) like many media companies is out-of-favour with investors. The company operates television broadcasting services across regional Australia and radio broadcasting rights including the Today Network which is broadcast across capital cities. With one analyst consensus forecasting earnings of 12.9 cents per share (cps) and dividends of 9 cps in FY 2014, the stock is currently available on a price-to-earnings ratio of 10.1 and a dividend yield of 6.9%.

Monadelphous Group Limited (ASX: MND) is regularly considered the gold standard when it comes to mining services companies. While the outlook for the sector continues to be concerning, arguably the slowdown is already reflected in some beaten down share prices – assuming we are approaching the bottom in FY 2015. With a consensus forecast for earnings per share (EPS) and dividends per share (DPS) of 151.6 cps and 122.5 cps respectively in FY 2015, Monadelphous is trading on a PE of 13.6 and yield of 6.8%

Seven Group Holdings Ltd (ASX: SVW) could well be described as between a rock and a hard place! Not only is the group exposed to the mining services sector through its heavy earth moving equipment Caterpillar business, but it also has a substantial shareholding in media company Seven West Media Ltd (ASX: SWM). With an analyst consensus forecast for EPS and DPS of 21 cps and 11.8 cps respectively in FY 2014, Seven Group is on a PE of 9.1 and yield of 6.1%.

Foolish takeaway

Having the courage to buy out-of-favour stocks can bring rewards in the long run. To do so requires correctly identifying stocks which have been mispriced –often due to negative news surrounding the stock – and also having the patience to wait for the market to wake up and realise that you’re right.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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