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Do you prefer stocks that pay reliable dividends? If so, surely you would like to focus on companies that will continue to pay those dividends in the long-term.

With this in mind we created the dividend stock list below. We began with a universe of S&P 500 dividend stocks paying yields between 1% and 5%. We wanted to stay conservative so stayed away from the high-risk high yielding stocks above 5%.

To find companies with reliable dividends, we focused on 2 statistics from the balance sheet, namely the growth in receivables, and inventories.

Although receivables are considered to be an asset, it becomes a risk when receivables grow and revenues decline. We looked through more than 30 balance sheets to find those with negative trends in revenue relative to accounts receivable, with slower growth in revenue year-over-year than growth in accounts receivable, as well as receivables comprising a larger portion of current assets.

Receivables represent the portion of revenue not yet collected, so the smaller the portion of revenue and current assets, the better.

We were left with 15 names on our list.

We then moved to looking at growth in quarterly revenue slower than growth in quarterly inventory year-over-year. We also looked for companies with quarterly inventory increasing as a percent of current assets.

When revenue is growing slower than inventory, it may indicate that the company is having trouble selling its inventory - although this might just indicate inventory building or a change in sales policies.

We were left with 4 companies on our list. All have attractive dividends, but troubling accounting signals.

A Closer Look

One of the stocks on our list, Cliff Natural Resources (NYSE:CLF), the largest producer of iron ore pellets in North America, deserves a closer look.

According to the research team at Hedgeye Risk Management, "Mining is a highly mature industry with long-term cyclical growth slightly below global GDP growth. It should not boom. When it does, you know something interesting is going on."

Hedgeye goes on to report "Mining capital spending is an obvious bubble. For example, global iron ore output went from ~1 billion tons in 2005 to ~3 billion tons last year. Capital spending above depreciation at the eight largest miners went from about $10 billion in 2004 to $56 billion in 2011. And 2004 was a fantastic year for mining capital spending."

Cliff Natural Resources reported a net loss of $899 million for 2012 versus a net profit of $1.6 billion in 2011. One of the reasons for the loss was lower iron ore prices. The company also cut its dividend from $0.625 to $0.15, and issued 9 million common shares.

Do you think the company is a victim of a capital spending bubble or is it low on liquidity?

Click play below for the change in quarterly sales of Cliff Natural Resources versus others on our list.

The List

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

1. Cliffs Natural Resources Inc. : Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products.

  • Market cap at $4.08B, most recent closing price at $25.81.
  • Revenue grew by -4.23% during the most recent quarter ($1,535.9M vs. $1,603.7M y/y). Accounts receivable grew by 14.28% during the same time period ($329M vs. $287.9M y/y). Receivables, as a percentage of current assets, increased from 15.06% to 19.94% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -4.23% during the most recent quarter ($1,535.9M vs. $1,603.7M y/y). Inventory grew by 7.69% during the same time period ($725.6M vs. $673.8M y/y). Inventory, as a percentage of current assets, increased from 35.26% to 43.98% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 2.3%.

2. CONSOL Energy Inc. (NYSE:CNX): Engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States.

  • Market cap at $7.17B, most recent closing price at $31.41.
  • Revenue grew by -9.94% during the most recent quarter ($1,388.96M vs. $1,542.21M y/y). Accounts receivable grew by 3.65% during the same time period ($915.69M vs. $883.47M y/y). Receivables, as a percentage of current assets, increased from 46.55% to 59.5% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -9.94% during the most recent quarter ($1,388.96M vs. $1,542.21M y/y). Inventory grew by -4.09% during the same time period ($247.77M vs. $258.33M y/y). Inventory, as a percentage of current assets, increased from 13.61% to 16.1% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 1.6%.

3. FLIR Systems, Inc. (NASDAQ:FLIR): Designs, manufactures, and markets thermal imaging and infrared camera systems in the U.

  • Market cap at $3.92B, most recent closing price at $26.16.
  • Revenue grew by -4.65% during the most recent quarter ($386.38M vs. $405.21M y/y). Accounts receivable grew by 1.69% during the same time period ($335.16M vs. $329.58M y/y). Receivables, as a percentage of current assets, increased from 26.62% to 28.76% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -4.65% during the most recent quarter ($386.38M vs. $405.21M y/y). Inventory grew by 13.49% during the same time period ($381.38M vs. $336.05M y/y). Inventory, as a percentage of current assets, increased from 27.14% to 32.73% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 1.4%.

4. Lockheed Martin Corporation (NYSE:LMT): Engages in the research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, homeland security, and government information technology in the United States and internationally.

  • Market cap at $28.25B, most recent closing price at $87.30.
  • Revenue grew by -0.92% during the most recent quarter ($12,099M vs. $12,211M y/y). Accounts receivable grew by 8.23% during the same time period ($6,563M vs. $6,064M y/y). Receivables, as a percentage of current assets, increased from 43.03% to 47.37% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -0.92% during the most recent quarter ($12,099M vs. $12,211M y/y). Inventory grew by 18.38% during the same time period ($2,937M vs. $2,481M y/y). Inventory, as a percentage of current assets, increased from 17.6% to 21.2% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 5%.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 4 S&P 500 Dividend Stocks With Troubling Accounting Signals