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Do you prefer stocks that pay part of their returns in dividends? We ran a screen on high yield dividend stocks that you might be interested in.

We began by screening for high yield dividend stocks: those paying dividend yields above 3% and sustainable payout ratios below 50%.

Because dividends are paid out from the company's profits, we wanted to make sure the sources are secure. So to analyze these companies' profitability, we ran DuPont analysis.

DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:

ROE

= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,

- Decreasing leverage, (i.e. decreasing Asset/Equity ratio)

- Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable and able to continue paying out their dividends.

For an interactive version of this chart, click on the image below. Market cap data sourced from Zacks Investment Research.

Do you think these stocks pay reliable dividends? Use this list as a starting point for your own analysis.

1. American States Water Company (AWR): Provides water, electric, and contracted services in the United States. Market cap at $892.38M, most recent closing price at $46.43. MRQ net profit margin at 13.98% vs. 13.03% y/y. MRQ sales/assets at 0.104 vs. 0.1 y/y. MRQ assets/equity at 2.873 vs. 2.952 y/y. Dividend yield at 3%. Payout at 44.9%.

2. Belo Corp. (BLC): Operates as a television company. Market cap at $671.09M, most recent closing price at $7.14. MRQ net profit margin at 14.08% vs. 9.02% y/y. MRQ sales/assets at 0.106 vs. 0.096 y/y. MRQ assets/equity at 5.409 vs. 5.749 y/y. Dividend yield at 4.5%. Payout at 37%.

3. Deluxe Corp. (DLX): Provides various personalized printed products, promotional products, and merchandising materials to small businesses and financial institutions in the United States, Canada, and Europe. Market cap at $1.53B, most recent closing price at $30.15. MRQ net profit margin at 10.97% vs. 10.34% y/y. MRQ sales/assets at 0.258 vs. 0.256 y/y. MRQ assets/equity at 3.687 vs. 4.896 y/y. Dividend yield at 3.32%. Payout at 30.54%.

4. Ingles Markets Inc. (IMKTA): Operates a supermarket chain in the southeast United States. Market cap at $409.27M, most recent closing price at $16.87. MRQ net profit margin at 1.34% vs. 1.21% y/y. MRQ sales/assets at 0.604 vs. 0.56 y/y. MRQ assets/equity at 3.59 vs. 3.747 y/y. Dividend yield at 3.9%. Payout at 35.3%.

5. Main Street Capital Corporation (MAIN): A business development company specializing in equity, equity related, and debt investments in small and lower middle market companies. Market cap at $949.8M, most recent closing price at $30.0. MRQ net profit margin at 139.3% vs. 84.49% y/y. MRQ sales/assets at 0.026 vs. 0.026 y/y. MRQ assets/equity at 1.576 vs. 1.979 y/y. Dividend yield at 6%. Payout at 46.5%.

6. PDL BioPharma, Inc. (PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap at $1.06B, most recent closing price at $7.57. MRQ net profit margin at 57.% vs. 54.82% y/y. MRQ sales/assets at 0.341 vs. 0.31 y/y. MRQ assets/equity at -2.164 vs. -1.112 y/y. Dividend yield at 7.93%. Payout at 45%.

7. Sunoco Logistics Partners L.P. (SXL): Engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States. Market cap at $5.19B, most recent closing price at $50.09. MRQ net profit margin at 4.16% vs. 3.33% y/y. MRQ sales/assets at 0.594 vs. 0.515 y/y. MRQ assets/equity at 4.241 vs. 5.116 y/y. Dividend yield at 3.75%. Payout at 45%.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 7 Dividend Stocks With Yields Above 3% With Strong Sources Of Profitability