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I have searched for very profitable stocks that pay rich dividends with a very low payout ratio. Those stocks would also have to show a very low debt.

I used the Portfolio123's powerful screener to perform the search. The screen's formula requires all stocks to comply with all following demands:

  1. The stock does not trade over-the-counter (OTC).
  2. Market cap is greater than $100 million.
  3. Price is greater than 1.00.
  4. Dividend yield is greater than 2%.
  5. The payout ratio is less than 40%.
  6. Total debt to equity is less than 0.40.
  7. The twenty stocks with the lowest payout ratio among all the stocks that complied with the first six demands.

As a result, twenty stocks came out, as shown in the charts below (the number of stocks left after each demand can be seen in the chart). In this article, I describe the three stocks with the lowest payout ratio among the twenty stocks. In my opinion, these stocks can reward an investor a significant capital gain along with a nice income. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from Yahoo Finance, Portfolio123 and finviz.com, on October 25, before the market open.

(click to enlarge)

Rank

Ticker

Name

Last Price

Market Cap $million

Industry

1

(HP)

Helmerich & Payne Inc.

75.00

7,984

Energy Equipment & Services

2

(RCKY)

Rocky Brands Inc

19.64

148

Textiles, Apparel & Luxury Goods

3

(EQU)

Equal Energy Ltd

4.83

172

Oil, Gas & Consumable Fuels

4

(GLNG)

Golar LNG Ltd

37.23

2,998

Oil, Gas & Consumable Fuels

5

(NATR)

Nature's Sunshine Products Inc

18.86

301

Personal Products

6

(SYMC)

Symantec Corp

24.62

17,200

Software

7

(MPC)

Marathon Petroleum

72.09

22,853

Oil, Gas & Consumable Fuels

8

(PSX)

Phillips 66

64.66

39,509

Oil, Gas & Consumable Fuels

9

(VLO)

Valero Energy Corp

40.13

21,754

Oil, Gas & Consumable Fuels

10

(HCC)

HCC Insurance Holdings

44.95

4,501

Insurance

11

(MNRK)

Monarch Financial Holdings Inc

11.60

122

Commercial Banks

12

(HIMX)

Himax Technologies Inc

9.93

1,684

Semiconductors & Semiconductor Equipment

13

(AFL)

AFLAC Inc

65.61

30,497

Insurance

14

(DK)

Delek US Holdings Inc

26.51

1,566

Oil, Gas & Consumable Fuels

15

(BRKS)

Brooks Automation Inc

9.42

626

Semiconductors & Semiconductor Equipment

16

(HCI)

HCI Group Inc

44.15

505

Insurance

17

(GPS)

Gap Inc.

36.93

17,283

Specialty Retail

18

(ACE)

ACE Ltd

96.29

32,745

Insurance

19

(MOS)

Mosaic Company

46.63

19,856

Chemicals

20

(FNF)

Fidelity National Financial

26.52

6,052

Insurance

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Helmerich & Payne Inc.

Helmerich & Payne, Inc. engages in the contract drilling of oil and gas wells.

(click to enlarge)

Source: company presentation

Helmerich & Payne has a very low debt (total debt to equity is only 0.05), and it has a very low trailing P/E of 11.55 and a low forward P/E of 13.58. The price-to-book value is at 1.88, and the average annual earnings growth estimates for the next five years is at 1.5%. The forward annual dividend yield is at 2.67%, and the payout ratio is only 6.60%. The annual rate of dividend growth over the past three years was high at 11.87% and over the past five years was also high at 9.24%.

The HP stock price is 3.61% above its 20-day simple moving average, 10.05% above its 50-day simple moving average and 18.49% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Helmerich & Payne has recorded strong revenue, EPS and dividend growth, during the last year, the last three years and the last five years, as shown in the table below.

The tables below emphasize the Helmerich & Payne's superior margins and return on capital over the industry median, the sector median and the S&P 500 median.

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(click to enlarge)

Source: Portfolio123

Helmerich & Payne has increased its market share by an impressive rate, as shown in the chart below.

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Source: company presentation

Helmerich & Payne will report its latest quarterly financial results on November 14. HP is expected to post a profit of $1.41 a share, a 4% rise from the company's actual earnings for the same quarter a year ago.

On July 26, Helmerich & Payne reported its third-quarter fiscal 2013 financial results, which beat EPS expectations by $0.10 and was in-line on revenues. The company reported income from continuing operations of $250,978,000 ($2.32 per diluted share) from operating revenues of $840,197,000 for its third fiscal quarter ended June 30, 2013, compared to income from continuing operations of $149,943,000 ($1.38 per diluted share) from operating revenues of $819,785,000 during last year's third fiscal quarter, and income from continuing operations of $151,067,000 ($1.39 per diluted share) from operating revenues of $838,309,000 during the second fiscal quarter of 2013.

Helmerich & Payne has recorded strong revenue, EPS and dividend growth, and it continues to capture market share. Considering its good valuation metrics, HP stock can move higher. Furthermore, the rich dividend represents a nice income.

Since the company is rich in cash ($4.51 a share) and has a very low debt and its payout ratio is very low, there is hardly a risk that the company will reduce its dividend payment.

Risks to the expected capital gain and to the dividend payment include a downturn in the U.S. economy, and lower oil and natural gas prices.

(click to enlarge)

Chart: finviz.com

Rocky Brands, Inc.

Rocky Brands, Inc. designs, manufactures, and markets footwear and apparel under the Rocky, Georgia Boot, Durango, Lehigh, Mossy Oak, and Michelin brand names.

Rocky Brands has a low debt (total debt to equity is only 0.25), and it has a low trailing P/E of 13.97 and a very low forward P/E of 11.98. The price-to-book value is at 1.16, and the average annual earnings growth estimates for the next five years is quite high at 10%. The forward annual dividend yield is at 2.04%, and the payout ratio is only 7.10%.

The RCKY stock price is 7.02% above its 20-day simple moving average, 11.38% above its 50-day simple moving average and 27.76% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Rocky Brands has recorded strong EPS growth, during the last year, the last three years and the last five years, as shown in the table below.

Most of Rocky Brands' stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.

(click to enlarge)

Rocky Brands will report its latest quarterly financial results on October 30. RCKY is expected to post a profit of $0.62 a share, a 14% decline from the company's actual earnings for the same quarter a year ago.

Rocky Brands has recorded strong EPS growth, and considering its compelling valuation metrics and its good earnings growth prospects, RCKY stock can move higher. Furthermore, the rich dividend represents a nice income.

(click to enlarge)

Chart: finviz.com

Equal Energy Ltd.

Equal Energy Ltd. engages in the acquisition, exploration, development, and production of petroleum and natural gas properties in Canada.

Equal Energy has a very low debt (total debt to equity is only 0.26), and it has a very low trailing P/E of 7.15 and a low forward P/E of 12.53. The price-to-cash ratio is at 8.20, and the price to book value is quite low at 1.08. The forward annual dividend yield is high at 4.14%, and the payout ratio is only 7.17%.

The EQU stock price is 2.87% above its 20-day simple moving average, 3.77% above its 50-day simple moving average and 26.58% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.

Equal Energy has recorded strong EPS growth, during the last year, the last three years and the last five years, as shown in the table below.

Most of Equal Energy's stock valuation parameters have been better than its industry median, sector median and the S&P 500 median, as shown in the table below.

(click to enlarge)

On August 08, Equal Energy reported its second-quarter financial results. In the quarter, Equal generated cash flow before balance sheet changes of $5.9 million. At June 30, 2013, Equal had $20.4 million of cash on hand, compared to $21.5 million at March 31, 2013, and CAD $125 million or the USD equivalent available on its credit facility. As previously disclosed, the Board has declared a regular third quarter cash dividend of US$0.05 per share payable on September 25, 2013 to shareholders of record on September 2, 2013.

On August 20, Equal Energy announced that after careful consideration, its board of directors unanimously rejected the non-binding expression of interest received on August 14, 2013 from Montclair Energy, LLC. Among the many factors considered by the Board in concluding that the New Proposal is not in the best interests of Equal and its stakeholders is that the value of the New Proposal is lower than premiums typically paid in take-over offers and represents a premium of only 7% over the closing price on August 14, 2013, prior to the New Proposal being publicly announced and only 10% over the 20 day volume weighted average trading price ending on August 14, 2013.

In my opinion, EQU stock can move higher, since it has compelling valuation metrics and it is a take-over candidate. Furthermore, the rich dividend represents a nice income.

Since the company is rich in cash ($0.59 a share) and has a low debt and its payout ratio is low, there is a hardly risk that the company will reduce its dividend payment. Risks to the expected capital gain include a downturn in the U.S. economy, and new rules for gas horizontal drilling by the Department of Environmental Protection.

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Chart: finviz.com

Source: Good-Yielding Stocks With A Low Payout Ratio And A Low Debt