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Do you prefer stocks that pay dividends you can rely on? We ran a screen with this idea in mind.

To create the list below we began by screening the S&P 500 for dividend stocks paying yields between 1-5%, and with sustainable payout ratios below 50%. We excluded stocks with yields above 5% so that we could avoid the riskier high-yield stocks.

We screened for those stocks that are outperforming their industry peers based on three metrics: Trailing twelve month (TTM) gross, operating and pre-tax margins. Besides suggesting that these companies are more efficient than their peers, strong margins strengthen the idea that dividends are secure.

Finally, we analyzed the financial statements of all qualifying companies for those with encouraging sales trends.

Specifically, we screened for 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. 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.

Our final list consisted of 3 stocks.

The List

For an ‪interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

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

1. ConocoPhillips (NYSE:COP): Operates as an integrated energy company worldwide.

  • Market cap at $72.42B, most recent closing price at $60.44.
  • TTM gross margin at 38.64% vs. industry average at 31.54%. TTM operating margin at 20.94% vs. industry average at 14.98%. TTM pretax margin at 26.61% vs. industry average at 14.79%.
  • Revenue grew by 1.54% during the most recent quarter ($16,366M vs. $16,118M y/y). Accounts receivable grew by -44.44% during the same time period ($9,182M vs. $16,526M y/y). Receivables, as a percentage of current assets, decreased from 54.69% to 38.28% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 4.37%, and payout ratio at 44%.

COP has reported strong earnings growth over the last year, with EPS growing by 15.19%, higher than competitors like Royal Dutch Shell plc (EPS growth over the last year at 0.0%) and Chevron Corporation (EPS growth over the last year at -0.89%).

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

  • Market cap at $54.81B, most recent closing price at $103.12.
  • TTM gross margin at 56.88% vs. industry average at 36.93%. TTM operating margin at 24.31% vs. industry average at 15.93%. TTM pretax margin at 23.19% vs. industry average at 13.62%.
  • 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 1.45%, and payout ratio at 31%.

Monsanto reported strong earnings growth over the last year, with EPS growing by 27.56%, higher than competitors like Agrium Inc. (EPS growth over the last year at 0.61%) and The Mosaic Company (EPS growth over the last year at -21.46%).

3. Sigma-Aldrich Corporation (NASDAQ:SIAL): Develops, manufactures, purchases, and distributes a range of chemicals, biochemicals, and equipment worldwide.

  • Market cap at $9.45B, most recent closing price at $78.67.
  • TTM gross margin at 56.54% vs. industry average at 36.93%. TTM operating margin at 25.66% vs. industry average at 15.93%. TTM pretax margin at 24.97% vs. industry average at 13.62%.
  • Revenue grew by 7.38% during the most recent quarter ($655M vs. $610M y/y). Accounts receivable grew by 3.49% during the same time period ($356M vs. $344M y/y). Receivables, as a percentage of current assets, decreased from 19.19% to 18.46% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 1.1%, and payout ratio at 21%.

Despite its positive monthly performance SIAL is lagging in its industry. The stock returned 1.81% over the last month, much lower than competitors LyondellBasell Industries NV (NYSE:LYB) and The Sherwin-Williams Company (NYSE:SHW), which returned 7.65% and 5.21% during the same time period. Only Williams Partners L.P. (NYSE:WPZ) performed worse, returning -8.26%.

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

Source: 3 S&P 500 Dividend Stocks With Encouraging Sales Trends And Strong Profitability