5 Dividend Stocks With Sustainable Payouts And Strong Sources Of Profitability

by: Kapitall

Do you prefer stocks that pay handsome dividend income? We ran a screen with this idea in mind.

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

Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:


= (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.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Do you think these dividend stocks are attractive? Use this as a starting-off point for your own analysis.

1. Belo Corp. (NYSE:BLC): Operates as a television company. Market cap at $699.29M, most recent closing price at $7.44. 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 4.22%, and payout ratio at 37.43%.

2. Deluxe Corp. (NYSE: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 $1.59B, most recent closing price at $31.26. 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 3.12%, and payout ratio at 30.54%.

3. Dr Pepper Snapple Group, Inc. (NYSE:DPS): Engages in the manufacture and distribution of non-alcoholic beverages in the United States, Canada, and Mexico. Market cap at $9.3B, most recent closing price at $44.69. MRQ net profit margin at 11.71% vs. 10.07% y/y. MRQ sales/assets at 0.17 vs. 0.166 y/y. MRQ assets/equity at 3.878 vs. 4.073 y/y. Dividend yield at 3.1%, and payout ratio at 45%

4. Ingles Markets Inc. (NASDAQ:IMKTA): Operates a supermarket chain in the southeast United States. Market cap at $440.56M, most recent closing price at $18.16. 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 3.83%, and payout ratio at 35.3%.

5. Main Street Capital Corporation (NYSE:MAIN): A business development company specializing in equity, equity related, and debt investments in small and lower middle market companies. Market cap at $925.42M, most recent closing price at $29.23. 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%, and payout ratio at 46%.

*Profitability data sourced from Finviz, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.