Do you prefer stocks that pay steady dividend income? We ran a screen with dividend sustainability in mind.
We began by screening for highly liquid dividend stocks: those paying dividend yields above 2%, and those with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover short-term liabilities.
We then screened for stocks with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform in the future.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks will continue to pay strong dividends? Use this list as a starting point for your own analysis.
1. CBOE Holdings, Inc. (NASDAQ:CBOE): Intends to operate as the holding company for Chicago Board Options Exchange, which operates as an organized marketplace for the trade of standardized, listed options on equity securities. Market cap at $2.68B, most recent closing price at $29.88. Net institutional purchases in the current quarter at 4.4M shares, which represents about 5.12% of the company's float of 85.97M shares. As of September 30th, 2012, the top 2 holders of the stock are T. Rowe Price (7.7%), and Horizon Kinetics (5.6%).
Dividend yield at 2%, and current ratio at 4.25.
2. Sturm, Ruger & Co. Inc. (NYSE:RGR): Engages in the design, manufacture, and sale of firearms in the United States. Market cap at $838.82M, most recent closing price at $44.33. Net institutional purchases in the current quarter at 1.7M shares, which represents about 9.18% of the company's float of 18.52M shares. As of September 30th, 2012, the top 2 holders of the stock are London Company of Virginia (7.2%), and Allianz Asset Management (7.1%).
Dividend yield at 2.9%, and current ratio at 3.18.
3. Watsco Inc. (NYSE:WSO): Distributes air conditioning, heating and refrigeration equipment, and related parts and supplies in the United States. Market cap at $2.63B, most recent closing price at $75.08. Net institutional purchases in the current quarter at 1.7M shares, which represents about 7.45% of the company's float of 22.82M shares. As of September 30th, 2012, the top 2 holders of the stock are FMR, LLC (9%), and the Vanguard Group (5%).
Dividend yield at 3.3%, and current ratio at 3.48.
*Institutional data sourced from Fidelity, all other data sourced from Finivz
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.