3 S&P 500 Dividend Stocks With Encouraging Accounting Trends

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Includes: CLX, D, ITW
by: Kapitall

To create the list below we began with a universe of S&P 500 dividend stocks paying yields between 1% and 5%.

We chose this range in order to stay conservative and avoid unstable yields. To further find companies with reliable dividends, we focused on two fundamental statistics from the balance sheet, namely the growth in receivables, and inventories.

Specifically, we screened the S&P 500 dividend stocks for strong sales trends, 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 screened for stocks 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.

Finally, we looked for those stocks with faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

We were left with 3 companies on our list. All have attractive dividends, and encouraging accounting trends.

Click play below for an interactive version of the change in quarterly sales for the stocks mentioned in the 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. The Clorox Company (NYSE:CLX): Manufactures and markets consumer and institutional products in the United States and internationally.

  • Market cap at $11.44B, most recent closing price at $88.53.
  • Revenue grew by 8.52% during the most recent quarter ($1,325M vs. $1,221M y/y). Accounts receivable grew by 4.5% during the same time period ($511M vs. $489M y/y). Receivables, as a percentage of current assets, decreased from 36.28% to 32.93% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Inventory grew by -1.55% during the same time period ($444M vs. $451M y/y). Inventory, as a percentage of current assets, decreased from 33.46% to 28.61% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 2.9%.
  • Earnings: Clorox has a lower than average projected earnings growth rate over the next 5 years (7.90%). This is below the analyst projections for competitors Helen of Troy Limited (projected EPS growth over next 5 years at 15.0%) and Blount International Inc. (projected EPS growth over next 5 years at 15.0%).

2. Dominion Resources, Inc. (NYSE:D): Engages in producing and transporting energy in the United States.

  • Market cap at $33.18B, most recent closing price at $58.18.
  • Revenue grew by 1.21% during the most recent quarter ($3,167M vs. $3,129M y/y). Accounts receivable grew by -15.63% during the same time period ($1,717M vs. $2,035M y/y). Receivables, as a percentage of current assets, decreased from 37.48% to 33.4% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Inventory grew by -6.6% during the same time period ($1,259M vs. $1,348M y/y). Inventory, as a percentage of current assets, decreased from 24.83% to 24.49% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 3.8%.
  • Earnings: Dominion has a higher than average projected earnings growth rate over the next 5 years (6.84%). This is higher than the likes of Duke Energy Corporation (projected EPS growth over next 5 years at 4.03%) and American Electric Power Co., Inc. (projected EPS growth over next 5 years at 3.86%).

3. Illinois Tool Works Inc. (NYSE:ITW): Manufactures a range of industrial products and equipment worldwide.

  • Market cap at $27.37B, most recent closing price at $60.94.
  • Revenue grew by 0.4% during the most recent quarter ($4,221M vs. $4,203.99M y/y). Accounts receivable grew by -2.73% during the same time period ($2,742M vs. $2,818.89M y/y). Receivables, as a percentage of current assets, decreased from 41.16% to 34.45% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Inventory grew by -7.63% during the same time period ($1,585M vs. $1,715.86M y/y). Inventory, as a percentage of current assets, decreased from 25.05% to 19.91% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 2.5%.
  • Earnings: The company has a lower than average projected earnings growth rate over the next 5 years (8.53%). This is significantly below the analyst projections for Siemens AG (projected EPS growth over next 5 years at 64.80%) and Danaher Corp. (projected EPS growth over next 5 years at 12.73%).

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Rebecca Lipman, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.