3 Dividend Stocks With Sustainable Payouts And Strong Sources Of Profitability

Includes: PDLI, SXL, VCI
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
  • 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. PDL BioPharma, Inc. (NASDAQ:PDLI): Engages in the management of antibody humanization patents and royalty assets, which consist of Queen et al. Market cap at $1.05B, most recent closing price at $7.53. MRQ net profit margin at 57.% vs. 54.82% year/year. MRQ sales/assets at 0.341 vs. 0.31 year/year. MRQ assets/equity at -2.164 vs. -1.112 year/year. Dividend yield at 7.96%, and payout ratio at 41.75%.

2. Sunoco Logistics Partners L.P. (NYSE: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 $5.48B, most recent closing price at $52.92. 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 3.55%, and payout ratio at 45%.

3. Valassis Communications Inc. (NYSE:VCI): Operates as a media and marketing services company primarily in the United States. Market cap at $1.07B, most recent closing price at $27.31. MRQ net profit margin at 7.01% vs. 5.2% y/y. MRQ sales/assets at 0.333 vs. 0.324 y/y. MRQ assets/equity at 3.385 vs. 3.497 y/y. Dividend yield at 4.54%, and payout ratio at 1%.

*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.