4 High-Yielding Dividend Stocks With A Low Debt

|
 |  Includes: INTX, KCAP, OB, PZN
by: Arie Goren

I have searched for very profitable companies that pay rich dividends. Those stocks would have to show a very low debt and strong earnings growth prospects.

I have elaborated a screening method, which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research. All the data for this article were taken from Yahoo Finance and finviz.com.

The screen's formula requires all stocks to comply with all following demands:

  1. Dividend yield is greater than 6.0%.
  2. The payout ratio is less than 85%.
  3. The PEG ratio is less than 1.50.
  4. Trailing P/E is less than 20.
  5. Debt-to-equity is less than 0.50.
  6. Average annual earnings growth estimates for the next 5 years is greater than 9%.

After running this screen on April 13, 2013, I discovered the following four stocks:

Click to enlarge

Click to enlarge

Click to enlarge

Intersections Inc. (NASDAQ:INTX)

Intersections Inc. provides subscription-based consumer protection services and other consumer products and services primarily in the United States.

Intersections has almost no debt at all (total debt to equity is only 0.02), and it has a very low trailing P/E of 8.20. The PEG ratio is very low at 0.82, and the price-to-sales ratio is also very low at 0.49. The price to free cash flow for the trailing 12 months is very low at 6.85, and the average annual earnings growth estimates for the next five years is at 10 %. The forward annual dividend yield is very high at 8.26%, and the payout ratio is at 63%.

The INTX stock is trading 34.4% below its 52-week high, and has 62% upside potential based on the consensus mean target price of $15.66.

On March 18, Intersections reported its fourth quarter and full year 2012 earnings and issues full year 2013 guidance.

Fourth Quarter 2012 Financial Highlights:

• Total subscribers decreased to approximately 4.5 million as of December 31, 2012 from 4.9 million as of December 31, 2011.

• Total consolidated revenue for the fourth quarter of 2012 was $84.4 million compared to $94.1 million for the fourth quarter of 2011.

• Consolidated net income for the quarter ended December 31, 2012 was $1.6 million, or $0.08 per diluted share, compared to $4.2 million, or $0.22 per diluted share, for the quarter ended December 31, 2011.

• Consolidated cash flow provided by operations for the quarter ended December 31, 2012, was approximately $10.3 million.

Full Year 2012 Financial Highlights:

• Total consolidated revenue for the year ended December 31, 2012 was $349.2 million, compared to $373.0 million for the year ended December 31, 2011.

• Consolidated net income for the year ended December 31, 2012 was $19.7 million, or $1.04 per diluted share, compared to $18.6 million, or $0.97 per diluted share, for the year ended December 31, 2011.

• Consolidated cash flow provided by operations for the year ended December 31, 2012 was approximately $48.9 million.

Full Year 2013 Guidance:

Intersections is currently forecasting revenue in 2013 to be between 10 percent to 15 percent lower, and adjusted EBITDA in 2013 to be between 40% to 50% lower, as compared to 2012.

Despite the weaker results, the INTX stock is still attractive due to the cheap valuation, the very rich dividend, and the 62% upside potential based on the consensus mean target price of $15.66.

INTX Dividend Chart

INTX Dividend data by YCharts

Click to enlarge

Chart: finviz.com

KCAP Financial, Inc. (NASDAQ:KCAP)

Kohlberg Capital Corporation is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. Kohlberg Capital has a low debt (total debt to equity is 0.49) and it has a very low trailing P/E of 12.41 and a very low forward P/E of 9.45. The PEG ratio is very low at 0.83, and the average annual earnings growth estimates for the next 5 years is quite high at 15%. The forward annual dividend yield is very high at 10.87%, and the payout ratio is at 79%.

The KCAP stock price is 1.07% above its 50-day simple moving average and 19.31% above its 200-day simple moving average. That indicates a mid-term and long-term uptrend. On March 15, KCAP Financial announced its 2012 financial results and announced first quarter 2013 dividend.

Financial Highlights

• Net investment income for the year ended December 31, 2012 was approximately $24.1 million, or $0.93 per share (basic) and $0.89 per share (diluted).

• During the year, KCAP Financial declared total quarterly dividends of $0.94 per share.

• At December 31, 2012, the fair value of KCAP Financial's investments totaled approximately $312.0 million.

• Net asset value per share of $7.85 as of December 31, 2012.

In the report, Dayl Pearson, President and Chief Executive Officer of KCAP Financial, noted:

This past year was transformative for us as our acquisition of Trimaran Advisors had a significant positive impact on our profitability. More importantly, the acquisition was critical to our ability to raise a new CLO fund in the fourth quarter of 2012 which restarted the growth of our asset management business.

The cheap valuation metrics, the very rich dividend, and the strong earnings growth prospects are all factors that make KCAP stock quite attractive.

KCAP Dividend Chart

Click to enlarge

Chart: finviz.com

OneBeacon Insurance Group, Ltd. (NYSE:OB)

OneBeacon Insurance Group, Ltd., through its subsidiaries, provides specialty property and casualty insurance products and services.

OneBeacon Insurance has a low debt (total debt to equity is only 0.27) and it has a very low trailing P/E of 13.56 and a very low forward P/E of 13.30. The PEG ratio is at 1.44, and the average annual earnings growth estimates for the next 5 years is quite high at 9.45%. The forward annual dividend yield is quite high at 6.13%, and the payout ratio is at 83%.

The OB stock price is 0.85% above its 20-day simple moving average, 2.56% above its 50-day simple moving average and 5.38% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend. The stock is trading 6.7% below its 52-week high, and has 17% upside potential based on the consensus mean target price of $16.00.

OneBeacon Insurance will report its latest quarterly financial results on April 22. OB is expected to post a profit of $0.28 a share, a $0.02 rise from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

The compelling valuation metrics, the very rich dividend, the 17% upside potential based on the consensus mean target price of $16.00, and the fact that the stock is in an uptrend are all factors that make OB stock quite attractive.

OB Dividend Chart

OB Dividend data by YCharts

Click to enlarge

Chart: finviz.com

Pzena Investment Management, Inc (NYSE:PZN)

Pzena Investment Management, Inc. is a publicly owned investment manager. It provides its services to individuals, typically high net worth individuals, investment companies, charitable organizations, corporations, state or municipal government entities, pension and profit sharing plans, and pooled investment vehicles.

Pzena Investment Management has no debt at all, and it has a trailing P/E of 19.74 and a very low forward P/E of 14.23. The price to free cash flow for the trailing 12 months is very low at 13.70, and the average annual earnings growth estimates for the next five years is quite high at 12%. The forward annual dividend yield is very high at 10.46%, and the payout ratio is at 78%. The annual rate of dividend growth over the past five years was quite high at 7.9%.

Pzena Investment Management will report its latest quarterly financial results on April 22. PZN is expected to post a profit of $0.09 a share, the same as the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.

The cheap valuation metrics, the very rich dividend, and the fact that the company consistently has raised dividend payments are all factors that make PZN stock quite attractive.

PZN Dividend Chart

PZN Dividend data by YCharts

Click to enlarge

Chart: finviz.com

KCAP Dividend data by YCharts

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.