I have searched for profitable companies that pay rich dividends and that are rich in cash and have very low debt.
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:
- The forward dividend yield is greater than 3.50%.
- The payout ratio is less than 60%.
- Total debt to equity is less than 0.30.
- Price-to-cash ratio is less than 8.
- Forward P/E is less than 16.
After running this screen on August 09, 2013, before the market open, I discovered the following three stocks:
Himax Technologies, Inc. (NASDAQ:HIMX)
Himax Technologies, Inc. designs, develops, and markets semiconductors for flat panel displays.
Himax Technologies has a very low debt (total debt to equity is only 0.17), and it has a trailing P/E of 20.75 and a very low forward P/E of 10.73. The price to free cash flow for the trailing 12 months is at 19.59, and the price-to-cash ratio is low at 7.10. The PEG ratio is very low at 0.73, and the average annual earnings growth estimates for the next five years is very high at 28.30%. The forward annual dividend yield is quite high at 3.77%, and the payout ratio is only 20%.
Analysts like the stock. Among the 6 analysts covering the stock, two rate it as a strong buy, and four rate it as a buy.
The HIMX stock price is 4.28% above its 20-day simple moving average, 11.69% above its 50-day simple moving average and 59.15% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
HIMX will report its latest quarterly financial results on August 15. HIMX is expected to post a profit of $0.12 a share, a 33% rise from the company's actual earnings for the same quarter a year ago.
The compelling valuation metrics, the rich dividend, the fact that the company is rich in cash ($0.93 a share) and has very low debt, and the fact that the stock is in an uptrend are all factors that make HIMX stock quite attractive.
Nevsun Resources Ltd. (NYSEMKT:NSU)
Nevsun Resources Ltd., a gold and base metal mining and exploration company, together with its subsidiaries, engages acquisition, exploration, development, and production of mineral properties in Africa.
Nevsun Resources has no debt at all, and it has an extremely low trailing P/E of 5.68 and a very low forward P/E of 5.91. The price-to-cash ratio is very low at 1.92, and the price to book value is quite low at 1.02. The price to free cash flow for the trailing 12 months is very low at 7.09, and the current ratio is very high at 16.60. The forward annual dividend yield is high at 4.32%, and the payout ratio is only 25%.
Analysts like the stock. Among the 4 analysts covering the stock, one rates it as a strong buy, two rate it as a buy, and one rates it as a hold.
On August 07, Nevsun Resources reported its second-quarter results.
Second quarter 2013 highlights
- Produced 34,900 ounces of gold
- Revenues of $54.8 million on 36,200 ounces gold
- Cash cost of $692 per ounce of gold sold
- Net income attributable to Nevsun shareholders was $5.3 million, $0.03 per share
- Copper flotation plant completed on time and under budget
- Commenced copper plant commissioning with pyrite sand
- Maintained strong balance sheet with approximately $384 million in working capital
- Announced 40% increase of semi-annual dividend to $0.07 per share
- Safety milestone reached - 12 million man hours without a lost time injury
In the report, Cliff Davis, President and CEO of Nevsun commented:
Q2 cash costs were managed to expectations helping Nevsun maintain a strong balance sheet despite the drop in metals prices and delivery of a significant capital expansion project. With $384 million in working capital, including $343 million in cash, no debt, a superior deposit and a supportive partner in the Government of Eritrea, the Company is well positioned for growth. Bisha's exploration program is expected to bear fruit in early 2014 and Nevsun has been successful in managing acquisition opportunities so as not be pulled into low return, high-risk investments. That said, given the challenges in the mining market, we are optimistic about external growth opportunities. It is good news that we consistently complete major capital projects on time and under budget. It is also great news that we are ahead of schedule on the copper plant commissioning.
All these factors -- the very low multiples, the very rich dividend, and the fact that the company is rich in cash ($1.68 a share) and has no debt -- make NSU stock quite attractive.
Umpqua Holdings Corporation (NASDAQ:UMPQ)
Umpqua Holdings Corporation operates as the holding company for Umpqua Bank and Umpqua Investments, Inc. that provide commercial, and retail banking and brokerage services to corporate, institutional, and individual customers in the United States.
Umpqua Holdings has a very low debt (total debt to equity is only 0.26), and it has a trailing P/E of 18.66 and a forward P/E of 15.85. The price-to-cash ratio is very low at 2.26, and the average annual earnings growth estimates for the next five years is quite high at 11.50%. The forward annual dividend yield is quite high at 3.53%, and the payout ratio is at 53%.
The UMPQ stock price is 2.16% above its 20-day simple moving average, 10.46% above its 50-day simple moving average and 30.67% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On July 17, Umpqua Holdings reported its second-quarter results, which beat EPS expectations by $0.02. The company announced second quarter 2013 net earnings available to common shareholders of $26.1 million, or $0.23 per diluted common share, compared to net earnings available to common shareholders of $23.2 million, or $0.21 per diluted common share for the first quarter of 2013, and $23.1 million, or $0.21 per diluted common share, for the same period in the prior year.
In the report, Ray Davis, president and CEO of Umpqua Holdings Corporation said:
It was another solid quarter for Umpqua, highlighted by strong earnings, increasing capital returns to shareholders, continued loan growth and the Financial Pacific Leasing acquisition. Looking to the near future, our conservative liquidity management strategy will enhance earnings through incremental funding of forecasted loan growth and Financial Pacific's growth expectations.
All these factors -- the rich dividend, the fact that the company is rich in cash ($7.51 a share) and has very low debt, and the fact that the stock is in an uptrend -- make UMPQ stock quite attractive.
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.