I have searched for profitable companies that pay very rich dividends and that have 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 4.20%.
- The payout ratio is less or equal 80%.
- Total debt to equity is less than 0.50.
- Trailing P/E is less than 15.
- Forward P/E is less than 17.
- Average annual earnings growth estimates for the next five years is greater or equal 3%.
After running this screen on August 15, 2013, before the market open, I discovered the following four stocks:
Garmin Ltd. (NASDAQ:GRMN)
Garmin Ltd., designs, develops, manufactures and markets hand-held, portable and fixed-mount global positioning system [GPS].
Garmin has no debt at all, and it has a low trailing P/E of 14.40 and a forward P/E of 16.22. The price-to-cash ratio is quite low at 6.20, and the average annual earnings growth estimates for the next five years is at 5.43%. The forward annual dividend yield is high at 4.63%, and the payout ratio is at 67%. The annual rate of dividend growth for the last three years was very high at 33.89%, and over the past five years was also very high at 19.14%.
The GRMN stock price is 1.78% above its 20-day simple moving average, 7.06% above its 50-day simple moving average and 7.33% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On July 31, Garmin reported its second-quarter financial results, which beat EPS expectations by $0.10 and beat on revenues.
- Total revenue of $697 million in second quarter 2013 with traditional segments of outdoor, fitness, aviation and marine delivering 51% of total revenues and growing 8% over the year ago quarter
- Operating margin of 24% with 64% of operating profit from traditional segments
- Continued to gain global market share in the PND industry
- Introduced the Monterra™, an Android™ powered outdoor GPS, supporting 3rd party applications for outdoor professionals and enthusiasts
- Announced the expansion of our relationships with Volkswagen and MINI, providing factory- or dealer-installed solutions for the compact car market
- Generated $186 million of free cash flow in second quarter 2013
In the report, Cliff Pemble, President and Chief Executive Officer, said:
The second quarter of 2013 was highlighted by stronger than expected revenue performance across all segments. We were particularly pleased to generate revenue growth in each of our traditional markets. While our performance was strong in second quarter and we believe that the outlook for growth in 2013 for the traditional markets is positive, we also anticipate that declines in the PND market will continue to be a significant headwind. Third quarter will be particularly challenging as we compare against a period of strong prior year sell-in driven by the timing of new product introductions and end-of-life promotions. Given these factors, we are maintaining our full year revenue and EPS guidance. Longer term, our primary focus remains innovation that is expected to fuel sustained revenue and EPS growth.
In my opinion, GRMN stock is quite attractive.
IAMGOLD Corp. (NYSE:IAG)
IAMGOLD Corporation engages in the exploration, development, and operation of mining properties. Its products include gold, silver, niobium and copper deposits.
IAMGold has a very low debt (total debt to equity is only 0.17), and it has a very low trailing P/E of 9.72 and a low forward P/E of 14.83. The price-to-book-value is very low at 0.59, and the price-to-cash ratio is also very low at 2.88. The forward annual dividend yield is high at 4.29%, and the payout ratio is only 42%. The annual rate of dividend growth over the past three years was very high 60.91%, and over the past five years was also high at 32.99%.
IAMGold has recorded strong revenue, EPS and dividend growth during the last three years and the last five years, as shown in the table below.
On August 12, IAMGOLD reported its second-quarter financial results, which missed EPS expectations by $0.01 and missed on revenues.
Second-Quarter 2013 Highlights
- Attributable gold production was 224,000 ounces (including 10,000 pre-commercial ounces from Westwood); attributable sales were 201,000 ounces.
- Total cash costs1 for all gold mines2 were $787 an ounce, below the bottom of the guidance range.
- All-in sustaining costs1 for all gold mines2 were $1,196 an ounce.
- With 55% of cost reduction target achieved and on track to reaching $100 million target by end of 2013, we are lowering:
- Total cash costs1 2013 guidance for all gold mines2 to $790-$840 an ounce from $850-$925 an ounce.
- All-in sustaining costs1 2013 guidance for all gold mines2 to $1,150-$1,250 an ounce from $1,200-$1,300 an ounce.
- Production guidance of 875,000 to 950,000 ounces for all gold mines2 maintained for 2013.
- Westwood ramping up and on track to meeting 130,000-150,000 ounce production target for 2013.
- Adjusted net earnings attributable to equity holders3 were $30.2 million, or $0.08 per share.
- Reported net losses attributable to equity holders were $28.4 million, or $0.08 a share, inclusive of $39.3 million in impairment charges related to marketable securities and equity accounted investments (at market value).
- Net cash from operating activities before changes in working capital3 was $68.3 million, or $0.18 per share.
- Ended the quarter with cash, cash equivalents and gold bullion (at market value) of $607.9 million.
- Maintained semi-annual dividend of $0.125 per common share.
In the report, Steve Letwin, President and CEO, said:
The rigorous implementation of our cost cutting program, with 55% of our target achieved to date, supports our decision to lower cost guidance to $790-$840 from $850-$925. We are very encouraged by these results and by the diligence with which we've seen employees at our sites working to deliver on this initiative. I'm confident that our cost cutting efforts in the second half of the year will continue to effect sustainable reductions to our cost structure.
In my opinion, IAG stock is a good investment right now.
New Mountain Finance Corporation (NYSE:NMFC)
New Mountain Finance Corporation operates as a closed-end, non-diversified management investment company.
New Mountain Finance has no debt at all, and it has a very low trailing P/E of 8.64 and a low forward P/E of 10.72. The price to book value is very low at 0.87, and the average annual earnings growth estimates for the next five years is at 8.0%. The forward annual dividend yield is very high at 9.26%, and the payout ratio is at 80%.
The NMFC stock price is 0.86% above its 20-day simple moving average, 1.29% above its 50-day simple moving average and 2.90% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On August 07, New Mountain Finance reported its second-quarter financial results.
Second-Quarter 2013 Highlights
- Second Quarter Adjusted Net Investment Income of $0.50 per Weighted Average Share
- Second Quarter Pro-Forma Adjusted Net Investment Income of $0.38 per Weighted Average Share After Deducting One-Time $0.12 YP Distribution
- Declares Third Quarter 2013 Dividend of $0.34 per Share
- Declares Special Dividend of $0.12 per Share
- Originated $150.3 Million of Assets in the Quarter
In the report, Robert Hamwee, CEO, commented:
We are very pleased with the second quarter's earnings, which underscores our focus on delivering both stable 'above the line' results as well as 'below the line' value. These results allowed us to pay a special dividend and more than cover our regular dividend. Our investment pace increased from the prior quarter, as we originated $150 million of investments and remain fully invested, all while maintaining an attractive portfolio yield. Most importantly, we once again experienced no material negative portfolio credit migration.
In my opinion, NMFC stock is a good investment right now.
Sun Life Financial Inc. (NYSE:SLF)
Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers.
Sun Life Financial has a low debt (total debt to equity is only 0.42) and it has a low trailing P/E of 14.61 and a very low forward P/E of 12.36. The PEG ratio is at 1.46, and the price-to-cash ratio is very low at 3.01. The price to free cash flow for the trailing 12 months is at 16.22, and the average annual earnings growth estimates for the next five years is quite high at 10%. The forward annual dividend yield is high at 4.25%, and the payout ratio is at 62%.
The SLF stock price is 1.09% above its 20-day simple moving average, 6.04% above its 50-day simple moving average and 15.99% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
On August 07, Sun Life Financial reported its second-quarter financial results.
Second Quarter 2013 Financial Highlights
- Operating net income from Continuing Operations of $431 million, compared to $250 million in the second quarter of 2012. Reported net income from Continuing Operations of $391 million, compared to $244 million in the same period last year. Results reflect strong insurance and wealth sales, product and pricing improvements and positive interest rate and credit experience
- Operating earnings per share ("EPS") from Continuing Operations of $0.71, compared to $0.42 in the second quarter of 2012. Reported EPS from Continuing Operations of $0.64, compared to $0.41 in the same period last year
- Operating return on equity ("ROE") (Combined Operations) of 12.8%, compared to 2.9% in the second quarter of 2012. Reported ROE (Combined Operations) of 10.7%, compared to 2.7% in the same period last year
- Quarterly dividend of $0.36 per share
- MCCSR ratio for Sun Life Assurance of 217%
- The Board of Directors of Sun Life Financial Inc. today declared a quarterly shareholder dividend of $0.36 per common share, maintaining the current quarterly dividend.
In my opinion, SLF stock is quite attractive right now.
Disclosure: I am long IAG. 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.