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Are you looking for extra dividend income but don't know where to start your search? To help you along we created a list of profitable dividend stocks that are outperforming their industry peers.

To create the list below we began by screening for dividend stocks paying dividend yields between 1-5% with sustainable payout ratios below 50%. We excluded stocks with yields above 5% so that we could avoid unsustainable payouts.

Next, to make sure the dividend paying companies are well run, which serves as assurance dividend payouts will continue, we screened for stocks outperforming their industry peers based on gross, operating and pre-tax margins.

As a testament to this outperformance, we then screened our stock list for names that have outperformed the market over the last quarter, with quarterly performance above 10%.

Finally, we analyzed the financials of the stocks on our list for strong sales trends, specifically comparing growth in revenue to growth in accounts receivable. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables, the healthier the company's revenue.

We selected only the names seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Our final list consisted of 4 stocks.

A Closer Look

We continued to analyze Choice Hotels International Inc. (CHH) in more detail. The stock trades around $37, close to its 52-week high of $37.79, up 30% in the past 1-year. More noteworthy is the 5-year dividend growth at 77%.

On February 11th, the company reported full year 2012 earnings per share of $2.11 versus $1.92 in 2011, a 10% increase supported by strong margins and top-line growth. Going forward, the company expects net domestic unit growth of approximately 1.5%, and RevPAR for full year 2013 to increase 4.5-5%.

Choice Hotels has continued to return cash to its shareholders in the form of dividends and share buybacks. In full year 2012, the company used $655 million in liquidity to pay dividends.

Would you invest in a company with strong top line growth, a lean balance sheet, and a history of strong dividend growth?

The List

For an interactive version of this chart, click on the image below.

Do you think these stocks pay sustainable dividend yields? Use this list as a starting point for your own analysis.

1. Grupo Aeroportuario Del Sureste SA de CV (ASR): Operates, maintains, and develops airports in the southeast region of Mexico.

  • Market cap at $3.77B, most recent closing price at $125.75.
  • TTM gross margin at 57.72% vs. industry average at 50.19%. TTM operating margin at 46.51% vs. industry average at 31.32%. TTM pretax margin at 47.14% vs. industry average at 30.65%.
  • Revenue grew by 16.5% during the most recent quarter ($1,222.01M vs. $1,048.98M y/y). Accounts receivable grew by -33.05% during the same time period ($1,060.63M vs. $1,584.23M y/y). Receivables, as a percentage of current assets, decreased from 47.64% to 35.33% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Dividend yield at 2.1%, and payout ratio of 49%. Performance over the last quarter at 23%.

2. Choice Hotels International Inc.: Operates as a hotel franchisor worldwide.

  • Market cap at $2.13B, most recent closing price at $36.76.
  • TTM gross margin at 43.85% vs. industry average at 35.99%. TTM operating margin at 28.48% vs. industry average at 18.59%. TTM pretax margin at 24.46% vs. industry average at 16.11%.
  • Revenue grew by 7.49% during the most recent quarter ($178.31M vs. $165.89M y/y). Accounts receivable grew by -1.4% during the same time period ($52.27M vs. $53.01M y/y). Receivables, as a percentage of current assets, decreased from 27.21% to 22.39% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 2%, and payout ratio of 27%. Performance over the last quarter at 18%.

3. Graco Inc. (GGG): Designs, manufactures, and markets systems and equipment to move, measure, control, dispense, and spray fluid materials.

  • Market cap at $3.43B, most recent closing price at $56.32.
  • TTM gross margin at 58.9% vs. industry average at 33.04%. TTM operating margin at 23.77% vs. industry average at 12.8%. TTM pretax margin at 21.47% vs. industry average at 10.75%.
  • Revenue grew by 17.67% during the most recent quarter ($253.68M vs. $215.59M y/y). Accounts receivable grew by 14.07% during the same time period ($172.14M vs. $150.91M y/y). Receivables, as a percentage of current assets, decreased from 25.89% to 22.15% during the most recent quarter (comparing 13 weeks ending 2012-12-28 to 13 weeks ending 2011-12-30).
  • Dividend yield at 2%, and payout ratio of 38%. Performance over the last quarter at 17%.

4. Monsanto Co. (MON): Provides agricultural products for farmers in the United States and internationally.

  • Market cap at $52.56B, most recent closing price at $98.09.
  • TTM gross margin at 56.88% vs. industry average at 37.07%. TTM operating margin at 24.31% vs. industry average at 16.01%. TTM pretax margin at 23.19% vs. industry average at 13.91%.
  • Revenue grew by 20.5% during the most recent quarter ($2,939M vs. $2,439M y/y). Accounts receivable grew by 8.97% during the same time period ($2,868M vs. $2,632M y/y). Receivables, as a percentage of current assets, decreased from 27.04% to 23.78% during the most recent quarter (comparing 3 months ending 2012-11-30 to 3 months ending 2011-11-30).
  • Dividend yield at 1.6% and payout ratio of 31%. Performance over the last quarter at 12%.

Profitability data sourced from Fidelity, all other data sourced from Finviz.

Source: 4 Profitable, Outperforming Dividend Stocks With Strong Sales Trends