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I have searched for very profitable stocks that pay rich dividends with a low payout ratio. Those stocks would also have to show a low forward P/E and 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. Dividend yield is greater than 3%.
  3. The annual rate of dividend growth over the past five years is greater than 5%.
  4. The payout ratio is less than 75%.
  5. Forward P/E is less than 15.
  6. The PEG ratio is less than 1.50.
  7. Total debt to equity is less than 0.50.
  8. The seven stocks with the lowest payout ratio among all the stocks that complied with the first seven demands.

As a result, seven 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 seven 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 27.


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Rank

Ticker

Name

Last Price

Market Cap $million

Industry

1

(NYSE:AGU)

Agrium Inc.

86.01

12,729

Chemicals

2

(NYSE:BVN)

Compania De Minas Buenaventura SA Buena

14.41

3,663

Metals & Mining

3

(NYSE:ESV)

ENSCO Plc

57.02

13,317

Energy Equipment & Services

4

(NASDAQ:HWCC)

Houston Wire & Cable

14.17

254

Trading Companies & Distributors

5

(NASDAQ:CA)

CA Inc

31.40

14,025

Software

6

(NASDAQ:INTC)

Intel Corp

24.24

120,715

Semiconductors & Semiconductor Equipment

7

(NASDAQ:MHLD)

Maiden Holdings Ltd

11.35

823

Insurance


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Agrium Inc.

Agrium Inc. engages in the retail of agricultural products and services.


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Source: company presentation

Agrium has a low debt (total debt to equity is only 0.48), and it has a very low trailing P/E of 9.43 and a very low forward P/E of 10.05. The price-to-sales ratio is very low at 0.78, and the average annual earnings growth estimates for the next five years is at 4.43%. The forward annual dividend yield is quite high at 3.49%, and the payout ratio is only 16.63%. The annual rate of dividend growth over the past five years was very high at 87%.

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

Most of Agrium'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.


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Source: Portfolio123

The chart below emphasizes Agrium's seed business strong growth prospects.


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Source: company presentation

Agrium will report its latest quarterly financial results in November. AGU is expected to post a profit of $0.60 a share.

Agrium has recorded strong revenue, EPS and dividend growth, and considering its good valuation metrics, AGU stock can move higher. Furthermore, the rich growing dividend represents a nice income.

Risks to the expected capital gain and to the dividend payment include a downturn in the U.S. economy, and a decline in the price of agriculture products.


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Chart: finviz.com

Compañía de Minas Buenaventura

Compañía de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining, and processing of gold and silver in Peru. Compañía de Minas Buenaventura S.A.A. was founded in 1953 and is headquartered in Lima, Peru.


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Source: company presentation

Compañía de Minas Buenaventura has a very low debt (total debt to equity is only 0.06), and it has a very low trailing P/E of 8.19 and a very low forward P/E of 10.13. The PEG ratio is low at 1.24, and the average annual earnings growth estimates for the next five years is at 6.6%. The price-to-book-value ratio is very low at 0.98. The forward annual dividend yield is quite high at 3.32%, and the payout ratio is only 28.5%. The annual rate of dividend growth for the last year was at 7.14%, for the last three years was very high at 55.36%, and over the past five years was also high at 16.89%.

The BVN stock price is 14.94% above its 20-day simple moving average and 14.24% above its 50-day simple moving average. That indicates a short-term and a mid-term uptrend.

Compañía de Minas Buenaventura has recorded strong revenue, EPS and dividend growth, during the last five years, as shown in the table below.

The tables below emphasize the Compañía de Minas Buenaventura's superior margins, return on capital and stock valuation parameters over the industry median, the sector median and the S&P 500 median.


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Compañía de Minas Buenaventura will report its latest quarterly financial results in November. BVN is expected to post a profit of $0.30 a share.

On July 30, Compañía de Minas Buenaventura reported its second-quarter financial results. EPS came in at $0.07, a $0.11 below expectations.

In the report, the company explained its new dividend policy:

As part of the cash control strategy, the Board of Directors proposed the modification of the dividend policy. The new policy is: Buenaventura will distribute an annual cash dividend of at least 20% of net income generated by majority-owned operations and subsidiaries. In the case of Buenaventura's Associates 20% of their net income will be included if they distribute cash dividends to Buenaventura.

The chart below, which was taken from the company presentation, shows the company's cash cost of mining gold, silver, zinc and copper.


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Compañía de Minas Buenaventura has recorded strong revenue, EPS and dividend growth, and considering its cheap valuation metrics, and the fact that the stock is trading below book value, BVN stock can move much higher once the gold bull market resumes. Furthermore, the rich dividend represents a nice income.

Risks to the expected capital gain and to the dividend payment include a further decline in the price of gold, and a change in the Peruvian government mines' policy.


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Chart: finviz.com

Ensco plc

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide.

Ensco has a low debt (total debt to equity is only 0.38), and it has a very low trailing P/E of 10.39 and a very low forward P/E of 7.87. The PEG ratio is very low at 0.62, and the average annual earnings growth estimates for the next five years is very high at 16.80%. The forward annual dividend yield is quite high at 3.29%, and the payout ratio is only 33.7%. The annual rate of dividend growth over the past five years was very high at 71.88%.

The ESV stock price is 3.98% above its 20-day simple moving average and 3.05% above its 50-day simple moving average. That indicates a short-term and a mid-term uptrend.

Ensco has recorded strong revenue 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 Ensco's superior margins, return on capital and stock valuation parameters over the industry median, the sector median and the S&P 500 median.


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On October 23, Ensco reported its third-quarter results, which beat EPS expectations by $0.06 and missed on revenues. Earnings increased $35 million to a record $379 million. Revenues grew 13% to a record $1.266 billion in third quarter 2013 from $1.124 billion a year ago. The average day rate for the fleet increased 13% to $225,000, mostly due to adding ENSCO 8506 and ENSCO DS-6 to the active fleet, as well as higher day rates for several floaters and an increase in the jackup segment average day rate.

Ensco has recorded strong revenue and dividend growth, and considering its cheap valuation metrics and its strong earnings growth prospects, ESV stock can move higher. Furthermore, the rich growing dividend represents a nice income.

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

Source: Dividend Growers With A Low Payout Ratio And A Low Debt