I have searched for profitable companies that pay very rich dividends and have a very low debt. I have elaborated a screening method which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.
The screen's formula requires all stocks to comply with all following demands:
- Dividend yield is greater than 4.2%.
- The payout ratio is less than 80%.
- Debt-to-equity is less or equal 0.20.
- Trailing P/E is less than 21.
- Forward P/E is less than 16.
After running this screen on February 24, 2013, I discovered the following three stocks:
National American University Holdings, Inc. (NAUH)
National American University Holdings, Inc. engages in the ownership and operation of National American University that provides post-secondary education services primarily for working adults and other non-traditional students in the United States.
National American University has a very low debt (total debt-to-equity is only 0.20), and the trailing P/E is at 20.38 and the forward P/E is very low at 9.67. The PEG ratio is very low at 0.74, and the price-to-sales ratio is also very low at 0.77. The forward annual dividend yield is very high at 4.24%, and the payout ratio is at 78.9%. The stock is trading 49.6% below its 52-week high and has 59% upside potential based on the consensus mean target price of $6.00. Analysts strongly recommend the stock, all four analysts covering the stock rate it as a strong buy.
On January 02, National American University reported its fiscal 2013 second quarter and six months results.
Fiscal 2013 second quarter Highlights
- Enrollment by headcount increased 7.2% over the same period last year to a record 11,685 students as of November 30, 2012.
- FY 2013 second quarter total revenue increased 13.3% to $34.5 million from $30.4 million in the prior-year period with the Company's academic segment's revenue increasing 13.5% to $34.2 million from $30.2 million in the FY 2012 second quarter.
- FY 2013 second quarter net income attributable to the Company increased 47.5% to $2.9 million from $1.9 million in the prior-year period, and FY 2013 second quarter EBITDA increased 43.9% to $6.3 million from $4.4 million in the prior-year period.
- The Board of Directors declared a cash dividend in the amount of $0.04 per share on all shares of the Company's common stock outstanding and of record as of the close of business on December 14, 2012, which was paid on or about December 28, 2012.
- Balance sheet at November 30, 2012, included cash and cash equivalents and investments of $28.2 million; working capital of $22.4 million; no short-term borrowings or long-term debt; and stockholders' equity of $51.6 million.
In the report, Ronald L. Shape, Ed.D., Chief Executive Officer of the Company, commented:
Because of our efforts and investment in geographic and programmatic expansion over the past two years, we have continued to achieve consistent enrollment growth during a challenging time for our industry. We have remained committed to providing academic quality and achieving positive student outcomes, and were pleased that NAU's enrollment increased 7.2% from the previous fall term to a record 11,685 students. For the second half of fiscal 2013, we will continue to focus on improving economies of scale by striving to grow enrollments at our current sites.
The compelling valuation metrics, the rich dividend, the 59% upside potential, the strong analysts' recommendation, and the good second quarter results are all factors that make NAUH stock quite attractive.
PetMed Express, Inc. (PETS)
PetMed Express, Inc. and its subsidiaries, doing business as 1-800-PetMeds, market prescription and non-prescription pet medications, health products, and supplies for dogs and cats in the United States.
PetMed Express has no debt at all, and the trailing P/E is at 15.89 and the forward P/E is at 15.70. The price-to-sales ratio is at 1.12, and the quick ratio is very high at 5.81. The forward annual dividend yield is very high at 4.60%, and the payout ratio is at 73.2%.
The PETS stock price is 0.88% above its 20-day simple moving average, 9.09% above its 50-day simple moving average and 19.86% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.
On January 22, PetMed Express reported its fiscal 2013 third quarter financial results, which beat EPS expectations by $0.06 and beat expectations on revenues. The company said that net income was $4.6 million, or $0.23 diluted per share, for the quarter ended December 31, 2012, compared to net income of $3.9 million, or $0.19 diluted per share, for the quarter ended December 31, 2011, a 19% increase to EPS. Net sales for the quarter ended December 31, 2012 were $49.6 million, compared to $50.5 million for the quarter ended December 31, 2011, a decrease of 1.8%. In the report, Menderes Akdag, President & CEO, commented:
We were able to increase our gross margins and decrease our operating expenses to improve our bottom line results this quarter. For the quarter ending December 31, 2012 our gross profit increased by 75 basis points, this increase can be attributed to a change in our product mix to higher margin items, including generics. For the quarter ending December 31, 2012 our operating expenses decreased by 170 basis points, mainly due to a reduction in advertising spending. The advertising costs of acquiring a new customer were reduced to $35 for the quarter ended December 31, 2012, compared to $36 for the same quarter the prior year. Cash from operation for the nine months ended December 31, 2012 increased 59% to $21.8 million, compared to $13.7 million for the same period the prior year. Although sales were slightly down during the quarter ended December 31, 2012, reorder sales increased by 1.2%. The unavailability of Novartis brands, due to the manufacturer's suspended production, continued to negatively impact our sales. Looking to the future, we will continue to focus on advertising efficiency to improve new order sales and shift sales to higher margin items, including generics, while continuing to expand our product offerings.
The rich dividend, the good fiscal 2013 third quarter results, and the fact that the stock is in an uptrend are all factors that make PETS stock quite attractive.
Washington Banking Co. (WBCO)
Washington Banking Company operates as the bank holding company for Whidbey Island Bank that provides community commercial banking services.
Washington Banking has a very low debt (total debt-to-equity is only 0.14), and the trailing P/E is very low at 12.76 and the forward P/E is also very low at 12.31. The forward annual dividend yield is very high at 4.31%, and the payout ratio is at 48.6%. The annual rate of dividend growth over the past five years was quite high at 12.3%.
The WBCO stock price is 0.31% above its 20-day simple moving average, 1.58% above its 50-day simple moving average and 2.69% above its 200-day simple moving average, which indicates short-term, mid-term and long-term uptrend.
On January 31, Washington Banking reported its 4th quarter and full-year 2012 financial results. The company said that for the fourth quarter of 2012 net income was $4.6 million, or $0.30 per diluted share, nearly even with the preceding quarter and up 8% compared to $4.2 million, or $0.28 per diluted share, in the fourth quarter of 2011. For the year 2012, earnings increased 13% to $16.8 million, or $1.09 per diluted share, compared to $14.9 million, or $0.97 per diluted share in 2011, which included $1.1 million for its final preferred dividend payment. In the report, Jack Wagner, president and chief executive officer said:
Profits continue to grow as loan demand from both commercial and residential borrowers is coming back. Our fourth quarter loan production was one of the best periods we have seen for a number of years, with the loan portfolio growing 3.5% in the quarter and 5% year-over-year. Mortgage banking revenues more than doubled in 2012, reflecting historically low interest rates and accelerating new home sales.
The cheap valuation metrics, the solid 4th quarter 2012 results, the rich dividend and the fact that the company consistently raises dividend payments are all factors that make WBCO stock quite attractive.