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To create the list below we started with a universe of stocks with a debt-to-equity ratio of less than 0.1. Also, we looked for those with a dividend yield of at least 1% but not more than 5%. These 2 metrics allowed us to focus on strong credit quality companies. Also, when we analyzed the balance sheet we focused on the total debt of the company instead of only long-term debt.

Debt is only one figure investors should consider when analyzing a stock. This positive attribute may deflect attention from troubling trends in the balance sheet. So to find names that investors should approach with caution we pulled 2 other statistics from the balance sheets, namely the growth in receivables and inventories.

To identify negative trends we started by identifying stocks with growth in quarterly revenue slower than growth in quarterly inventory year-over-year. We also looked for companies with quarterly inventory increasing as a percent of current assets.

Why? When revenue is growing slower than inventory, it may indicate that the company is having trouble selling its inventory - although this might just indicate inventory building or a change in sales policies.

Receivables are considered to be an asset but it represents the portion of revenue not yet collected. It therefore becomes a risk when receivables grow and revenues decline. We looked through the balance sheets to find those with negative trends in revenue relative to accounts receivable, with slower growth in revenue year-over-year than growth in accounts receivable, as well as receivables comprising a larger portion of current assets.

We were left with 3 companies on our list. All have troubling accounting signals and low debt.

Click play below for the change in quarterly sales for these stocks:

Do you think its time to become cautious of these 4 companies by looking beyond credit? Use the list below as a starting point of your analysis.

1. Canon Inc. (NYSE:CAJ): Manufactures and sells network digital multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras, and lithography equipments primarily under Canon brand in the Americas, Europe, Asia and Oceania.

  • Market cap at $50.06B, most recent closing price at $37.95.
  • Revenue grew by -1.39% during the most recent quarter ($951,394M vs. $964,757M y/y). Accounts receivable grew by 7.53% during the same time period ($573,375M vs. $533,208M y/y). Receivables, as a percentage of current assets, increased from 24.76% to 27.54% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -1.39% during the most recent quarter ($951,394M vs. $964,757M y/y). Inventory grew by 15.72% during the same time period ($551,623M vs. $476,704M y/y). Inventory, as a percentage of current assets, increased from 22.14% to 26.49% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 4%, and debt-to-equity at 0.01.

2. Goldcorp Inc. (NYSE:GG): Engages in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America.

  • Market cap at $22.6B, most recent closing price at $27.86.
  • Revenue grew by -5.28% during the most recent quarter ($1,435M vs. $1,515M y/y). Accounts receivable grew by 39.96% during the same time period ($718M vs. $513M y/y). Receivables, as a percentage of current assets, increased from 17.39% to 28.4% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -5.28% during the most recent quarter ($1,435M vs. $1,515M y/y). Inventory grew by 25.78% during the same time period ($722M vs. $574M y/y). Inventory, as a percentage of current assets, increased from 19.46% to 28.56% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Dividend yield at 2.2%, and debt-to-equity at 0.03.

3. The Mosaic Company (NYSE:MOS): Engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide.

  • Market cap at $24.43B, most recent closing price at $57.53.
  • Revenue grew by 2.33% during the most recent quarter ($2,240.6M vs. $2,189.5M y/y). Accounts receivable grew by 54.99% during the same time period ($1,017.2M vs. $656.3M y/y). Receivables, as a percentage of current assets, increased from 11.07% to 16.04% during the most recent quarter (comparing 3 months ending 2013-02-28 to 3 months ending 2012-02-29).
  • Revenue grew by 2.33% during the most recent quarter ($2,240.6M vs. $2,189.5M y/y). Inventory grew by 18.24% during the same time period ($1,569.4M vs. $1,327.3M y/y). Inventory, as a percentage of current assets, increased from 22.38% to 24.75% during the most recent quarter (comparing 3 months ending 2013-02-28 to 3 months ending 2012-02-29).
  • Dividend yield at 1.8%, and debt-to-equity at 0.08.


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

Source: 3 Low-Debt Dividend Paying Large Caps With Troubling Accounting Trends