Do you prefer stocks that pay part of their return in dividend income? If so, here's a list you might be interested in.
We ran a screen on the S&P 500 for stocks paying dividend yields above 2% and sustainable payout ratios below 50%. We then ran a DuPont analysis on return on equity (ROE) profitability to find those with strong sources of profits
DuPont analyzes return on equity (ROE, or net income/equity) profitability by breaking ROE up into three components:
ROE
= (Net Profit/Equity)
= (Net Profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit Margin)*(Asset Turnover)*(Leverage Ratio)
It therefore focuses on companies with the following 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.
Companies with all of these characteristics are experiencing increasing profits due to operations and not due to increased use of financial leverage.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings 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. Avalonbay Communities Inc. (AVB): Engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities in the United States. Market cap at $15.61B, most recent closing price at $139.15. MRQ net profit margin at 31.94% vs. 18.39% y/y. MRQ sales/assets at 0.03 vs. 0.029 y/y. MRQ assets/equity at 1.901 vs. 2.046 y/y. Dividend yield at 2.79%.
2. Dr Pepper Snapple Group, Inc. (DPS): Engages in the manufacture and distribution of non-alcoholic beverages in the United States, Canada, and Mexico. Market cap at $9.41B, most recent closing price at $45.20. 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%.
3. General Electric Company (GE): Operates as a technology, service, and finance company worldwide. Market cap at $230.8B, most recent closing price at $22.01. MRQ net profit margin at 10.2% vs. 9.82% y/y. MRQ sales/assets at 0.057 vs. 0.053 y/y. MRQ assets/equity at 5.572 vs. 6.162 y/y. Dividend yield at 3.45%.
4. HCP, Inc. (HCP): Operates an independent hybrid real estate investment trust. Market cap at $21.07B, most recent closing price at $46.60. MRQ net profit margin at 41.24% vs. 39.02% y/y. MRQ sales/assets at 0.026 vs. 0.025 y/y. MRQ assets/equity at 1.899 vs. 1.911 y/y. Dividend yield at 4.29%.
5. H. J. Heinz Company (HNZ): Manufactures and markets food products for consumers, and foodservice and institutional customers in North America, Europe, the Asia Pacific, and internationally. Market cap at $19.28B, most recent closing price at $60.14. MRQ net profit margin at 10.24% vs. 8.42% y/y. MRQ sales/assets at 0.237 vs. 0.232 y/y. MRQ assets/equity at 4.157 vs. 4.271 y/y. Dividend yield at 3.43%.
6. Target Corp. (TGT): Operates general merchandise stores in the United States. Market cap at $40.02B, most recent closing price at $61.49. MRQ net profit margin at 3.76% vs. 3.38% y/y. MRQ sales/assets at 0.341 vs. 0.339 y/y. MRQ assets/equity at 3.032 vs. 3.174 y/y. Dividend yield at 2.34%.
*Accounting data sourced from Google finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
