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:
= (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. ABM Industries Inc. (NYSE:ABM): Provides facility services for commercial, industrial, institutional, and retail facilities primarily in the United States. Market cap at $1.08B, most recent closing price at $19.95. MRQ net profit margin at 2.54% vs. 1.67% y/y. MRQ sales/assets at 0.583 vs. 0.575 y/y. MRQ assets/equity at 2.198 vs. 2.362 y/y. Dividend yield at 3%.
2. Saul Centers Inc. (NYSE:BFS): Operates as a real estate investment trust in the United States. Market cap at $828.24M, most recent closing price at $42.79. MRQ net profit margin at 16.73% vs. 12.83% y/y. MRQ sales/assets at 0.04 vs. 0.036 y/y. MRQ assets/equity at 4.637 vs. 4.839 y/y. Dividend yield at 3.37%.
3. Broadridge Financial Solutions Inc. (NYSE:BR): Provides technology-based solutions to the financial services industry in the United States, Canada, and the United Kingdom. Market cap at $2.78B, most recent closing price at $22.88. MRQ net profit margin at 3.69% vs. 3.51% y/y. MRQ sales/assets at 0.271 vs. 0.247 y/y. MRQ assets/equity at 2.319 vs. 2.432 y/y. Dividend yield at 3.15%.
4. CDI Corp. (NYSE:CDI): Provides engineering and information technology project outsourcing solutions and professional staffing services primarily in the United States, the United Kingdom, and Canada. Market cap at $326.07M, most recent closing price at $17.13. MRQ net profit margin at 1.91% vs. 1.03% y/y. MRQ sales/assets at 0.701 vs. 0.675 y/y. MRQ assets/equity at 1.427 vs. 1.504 y/y. Dividend yield at 3%.
5. Chesapeake Lodging Trust (NYSE:CHSP): Market cap at $804.48M, most recent closing price at $20.88. MRQ net profit margin at 11.9% vs. 11.07% y/y. MRQ sales/assets at 0.064 vs. 0.057 y/y. MRQ assets/equity at 1.548 vs. 1.751 y/y. Dividend yield at 4.2%.
6. Douglas Emmett Inc (NYSE:DEI): Operates office and multifamily properties in California and Hawaii. Market cap at $3.26B, most recent closing price at $23.33. MRQ net profit margin at 3.46% vs. 2.36% y/y. MRQ sales/assets at 0.024 vs. 0.023 y/y. MRQ assets/equity at 3.092 vs. 3.424 y/y. Dividend yield at 3.1%.
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.