In consideration of investors looking for stocks that pay handsome and reliable dividend income we created this list with a universe of companies offering yields between 2%-5%, and sustainable payout ratios below 50%. This allowed us to avoid high yield names with potentially unsustainable payouts.
Dividend income investment ideas are only important if the long-term payout is predictable, and we are comfortable with the future profitability of the company.
We further analyzed our list of companies for strong profitability by performing DuPont analysis. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components. If the ROE is unsatisfactory, the DuPont analysis helps target the part of the business that is underperforming. Learn more about the equation here.
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
Our final list consisted of 5 stocks.
For an interactive version of this chart, click on the image below.
Do you think these dividend stocks are attractive? Use this as a starting-off point for your own analysis.
1. Chesapeake Utilities Corporation (CPK): Operates as a diversified utility company that primarily engages in regulated energy and unregulated energy businesses.
- Market cap at $482.42M, most recent closing price at $50.72.
- MRQ net profit margin at 9.% vs. 7.65% y/y. MRQ sales/assets at 0.149 vs. 0.147 y/y. MRQ assets/equity at 2.86 vs. 2.945 y/y.
- Dividend yield at 2.9%, and payout ratio at 48%.
- The company has reported strong earnings growth over the last year, with EPS growing by 4.23%, higher than competitors like TransCanada Corp. (EPS growth over the last year at -15.24%) and Sempra Energy (EPS growth over the last year at -36.81%).
2. Deluxe Corp. (DLX): Provides various personalized printed products, promotional products, and merchandising materials to small businesses and financial institutions in the United States, Canada, and Europe.
- Market cap at $2.15B, most recent closing price at $41.79.
- MRQ net profit margin at 11.% vs. 10.87% y/y. MRQ sales/assets at 0.274 vs. 0.264 y/y. MRQ assets/equity at 3.262 vs. 4.588 y/y.
- Dividend yield at 2.4%, and payout ratio at 30%.
- DLX has a lower than average projected earnings growth rate over the next 5 years (7.50%).
3. Fidelity National Information Services, Inc. (FIS): Provides banking and payments technology solutions worldwide.
- Market cap at $12.07B, most recent closing price at $40.75.
- MRQ net profit margin at 9.11% vs. 8.01% y/y. MRQ sales/assets at 0.111 vs. 0.105 y/y. MRQ assets/equity at 2.04 vs. 2.133 y/y.
- Dividend yield at 2.2%, and payout ratio at 44%.
- Fidelity National Information Services, Inc. has a low short float (0.75%) compared to industry averages, suggesting perhaps that short sellers see limited downside in the stock.
4. Foot Locker, Inc. (FL): Operates as a retailer of athletic footwear and apparel.
- Market cap at $5.11B, most recent closing price at $34.51.
- MRQ net profit margin at 6.07% vs. 5.39% y/y. MRQ sales/assets at 0.509 vs. 0.492 y/y. MRQ assets/equity at 1.416 vs. 1.445 y/y.
- Dividend yield at 2.3%, and payout ratio at 27%.
- FL has performed in line with the rest of its industry since 3/15/13, returning 6.64% over the last month. This performance has been better than Gap Inc. (GPS) but worse than industry leaders Limited Brands, Inc. (LTD), which returned 11.55%.
5. Nordstrom Inc. (JWN): Offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States.
- Market cap at $11.17B, most recent closing price at $56.82.
- MRQ net profit margin at 7.67% vs. 7.23% y/y. MRQ sales/assets at 0.458 vs. 0.385 y/y. MRQ assets/equity at 4.228 vs. 4.341 y/y.
- Dividend yield at 2.1%, and payout ratio at 30%.
*Profitability data sourced from Finviz, all other data sourced from Finviz.