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By Siraj Sarwar

In the current low interest rate environment, retirees can achieve far higher returns through investments in high-dividend stocks than by sticking with government bonds. Such sound high-dividend stocks worthy of investment are characterized by the presence of a good income statement, balance sheet and cash flows to give support to dividends as well as price appreciation.

In this article, I pick four companies for consistently growing returns. These companies all have solid financial statements to back returns for investors. Let's review each company's financial situation to examine its ability to sustain growing returns for shareholders.

General Electric Company (GE) provides services ranging from aircraft engines, power generation, and water processing & household appliances. After shedding underperforming businesses over the last few years, General Electric has positioned itself to be a leader in all markets in which it competes.

GE Dividend Chart

GE Dividend data by YCharts

The chart above also demonstrates a successful business strategy, which led the company to produce attractive returns. GE was able to increase returns both in value and dividends. In the last year alone, the company has been able to increase its dividends by 11.76%. On the other hand, over the year, the company's stock has shown an exceptional growth. In the last year alone, its price has appreciated by nearly 16.79%.

Why returns are safe

Financial Analysis

2009

2010

2011

2012

Revenue

$156,783

$150,211

$147,300

$147,359

Gross Margin

51.58%

52.26%

53.65%

49.57%

Operating Income

6.60%

9.46%

13.64%

13.75%

Net income available to share holders

6.84%

7.55%

8.91%

9.26%

Morningstar.com [Revenue in millions]

As the above table demonstrates, its solid returns are fully backed by a strong financial performance. Its revenue growth is quite stagnant; however, the company was still able to grow Earnings Per Share [EPS] year-over-year. Its gross margin has condensed due to volatile economic situations. However, amazingly, in the past five years, it was able to cut operating expenses from 43.61% of sales to 35.82% in 2012. These cost cutting measures enabled the company to be able to grow its earnings each year.

Furthermore, its cash flows are also in a solid position. Free cash flows adequately cover dividend payments. At the end of 2012, its free cash flow stood at $16,205 million while dividend payments stood at $6,922 million. In addition, its strong cash position enabled the repurchase of $2.1 billion of stock during Q4 and $5.2 billion of stock for the full year. Its financial health also presents a stable situation. Below are a few key metrics demonstrating this trend.

  • Current Ratio 1.94
  • Quick Ratio 1.87
  • Debt/Equity 1.92

General Electric Company is well-positioned to generate consistently growing returns, with its biggest backlog in history and a considerable amount of cash. The company has a strong financial position to support both dividends and price. The company's balance sheet also seems in good condition with high quick and current ratios. GE can be a safe pick for long-term investors.

General Mills, Inc. (GIS) is the manufacturer and marketer of popular branded consumer foods. It also supplies branded and unbranded food products to the food service and commercial baking industries. General Mills is one of the best growth stories of recent days. Over the years, the company has shown an outstanding growth in all aspects of its business. General Mills continues to drive solid results across its varied worldwide operations.

GIS Chart

GIS data by YCharts

As shown in the chart below, General Mills has been achieving exceptional growth both in dividends and value. Over the past five years, the company has been consistently increasing its dividends, representing an increase of nearly 90%. Recently, the company hiked its dividends by 15% to $0.38 cents per share. In addition, its price has been appreciated by nearly 59.78%

Why returns are safe

Financial Analysis

Dollars in Million

2010

2011

2012

TTM

Revenue

$14,797

$14,880

$16,658

$17,430

Gross Margin

39.70%

40.01%

36.29%

36.66%

Operating Margin

17.61%

18.65%

15.38%

16.00%

EBT Margin

14.90%

16.32%

13.27%

14.18%

Net Margin

10.34%

12.09%

9.41%

10.41%

Morningstar.com [Revenue in millions]

As the above table demonstrates, the company has been displaying a solid income statement. Over the past three years, on average, its revenue growth stood at 4.5% when the industry average stood at a negative 11.2%. On the negative side, its margin condensed due to continuing intense competition in the market. The company has started a restructuring program to attempt to cut operating expenses. Below are a few key metrics revealing its financial health.

  • Current Ratio 1.02
  • Quick Ratio 0.55
  • Debt/Equity 0.95
  • Financial Leverage 3.25

At the end of Q3, General Mills' current ratio stood at 1.02. Current ratio is a valuable metric to determine the company's ability to meet current obligations. At present, General Mills has a fair amount of cash and cash equivalents in its balance sheet. Its current assets represent 19.15% of its total assets. On the other hand, current liabilities account for only 18.79% of stockholders' equity. Its quick and debt-to-equity ratio are also at a stable position.

Figures in Million

2010

2011

2012

TTM

Operating cash flow

$2,181

$1,527

$2,402

$2,886

Capital expenditure

($650)

($649)

($676)

($664)

Free cash flow

$1,531

$878

$1,726

$2,222

Morningstar.com

General Mills has been able to generate strong operating cash flows. Over the past five years, on average, its operating cash flow grew by 6.01%. Its free cash flows also sketches out a similar trend. Its cash flows adequately cover its dividend payments. In the Trailing Twelve Months [TTM], its dividend payments stood at $852 million while its free cash flow stood at $2,222 million. After dividend payments, the company has sufficient amounts needed to pay debt liabilities.

At the moment, General Mills has a considerable amount of cash flows to support dividends, its repurchase program and to meet debt obligations. Above all, with its recent dividend increase and forecasted growth in EPS, I believe General Mills is a stock for the long haul. With its solid financial position and continued potential to post record profits, the company will continue to return substantial value to shareholders.

Kimberly-Clark Corporation (KMB) is engaged in the manufacturing and marketing of a range of essential products to improve people's lives around the world.

KMB Dividend Chart

KMB Dividend data by YCharts

As shown in the above chart, Kimberly-Clark has been showing exceptional growth both in dividend and value. In the past five years, Kimberly-Clark has been able to increase its dividends by 39.66%. Recently, it increased its dividends from $0.74 cents to $0.81 cents per share. For the full year of 2012, Kimberly-Clark paid a dividend of $2.96 per share, yielding at 3.51%. On the other hand, over the years, Kimberly-Clark stock has shown exceptional growth. In the last year alone, its price has been appreciated by nearly 22.62%.

Why returns are safe

Kimberly-Clark's returns are backed by a strong financial situation. In the past three years, on average, the company had been able to grow revenue by 3.3% when the industry average stood at 1.4%. In addition, over the past year, it was able to improve margins. In the Trailing Twelve Months , its profit margin stood at 10.06%.

2010

2011

2012

Operating cash flow

$2,744

$2,288

$3,288

Capital expenditure

$(964)

$(968)

$(1,093)

Free cash flow

$1,780

$1,320

$2,195

Morningstar.com [Dollars in millions]

Furthermore, its cash flows are growing at a massive pace. Since 2010, it was able to stretch its operating cash by $544 million. Free cash flow is also growing at a high pace. At the end of 2012, it was able to expand free cash flows by $875 million. Its free cash flows adequately cover its dividend payments.

With hefty cash flows, the company is also working on a repurchase program. With a strong financial performance, the company looks likely to continue to generate growing returns. Its financial health also presents a stable situation. Below are a few key metrics demonstrating this trend.

  • Current Ratio 1.08
  • Quick Ratio 0.62
  • Debt/Equity 1.02
  • Financial Leverage 3.99

Clorox Company (CLX) is a manufacturer and marketer of consumer products. It sells its products through mass merchandisers, grocery stores and other retail outlets.

CLX Dividend Chart

CLX Dividend data by YCharts

As shown in the above chart, Clorox has been showing exceptional growth both in dividends and value. Over the past five years, the company has been able to increase its dividends by 60%. In the last year alone, Clorox has increased its dividend by 6.67%. For the full year of 2012, Clorox paid a dividend of $2.48 per share. On the other hand, over the year, the company's stock has shown an exceptional growth. In the last five years, its price has been appreciated by nearly 56.72%.

Why returns are safe

The company has a strong financial position to support both dividends and price. Below are a few key metrics demonstrating the company's ability to sustain growing returns for investors.

  • EPS [TTM] $4.28
  • Estimate for EPS next year $4.70
  • Estimated EPS growth next 5 years 8%
  • Profit Margin 10.06%
  • Payout ratio 58.16%
Source: 4 Stocks For The Ultimate Retirement Portfolio