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One consideration to keep in mind when choosing sources of dividend income is whether a company is generating enough cash flow to cover dividends – after all, companies usually pay their dividends from their cash flows.

We ran a screen on dividend stocks paying yields above 2% and sustainable payout ratios below 35%. We searched this universe for those seeing at least 20% growth in free operating cash flow/revenue, comparing the trailing-12-month ratio to the five-year average. On top of this, we found those undervalued to earnings growth (with PEG < 1).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.



Do you think these companies are paying sustainable dividends? Use this list as a starting point for your own analysis.

List sorted by dividend yield.

1. Aircastle LTD (NYSE:AYR): Rental and Leasing Services Industry. Market cap of $929.42M. TTM free operating cash flow/revenue at 0.84 vs. five-year average at 0.40. Dividend yield at 3.30%, payout ratio at 18.62%. TTM diluted EPS at $1.13, MRQ Book Value Per Share at $17.65, implies a Graham number of $21.18 (vs. current price at $12.11, implies a potential upside of 74.93%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.26). The stock has gained 46.98% over the last year.

2. Republic Bancorp Inc. (NASDAQ:RBCAA): Regional Banks Industry. Market cap of $423.20M. TTM free operating cash flow/revenue at 0.50 vs. five-year average at 0.23. Dividend yield at 2.84%, payout ratio at 4.15%. TTM diluted EPS at $4.36, MRQ Book Value Per Share at $21.04, implies a Graham number of $45.43 (vs. current price at $20.31, implies a potential upside of 123.69%). The stock is a short squeeze candidate, with a short float at 5.44% (equivalent to 11.45 days of average volume). The stock has lost 18.61% over the last year.

3. PH Glatfelter Co. (NYSE:GLT): Paper and Paper Products Industry. Market cap of $723.75M. TTM free operating cash flow/revenue at 0.08 vs. five-year average at 0.03. Dividend yield at 2.30%, payout ratio at 23.78%. TTM diluted EPS at $1.56, MRQ Book Value Per Share at $12.69, implies a Graham number of $21.10 (vs. current price at $15.67, implies a potential upside of 34.68%). The stock is a short squeeze candidate, with a short float at 7.55% (equivalent to 10.9 days of average volume). The stock has gained 43.43% over the last year.

4. Union First Market Bankshares Corporation (NASDAQ:UBSH):
Regional Banks Industry. Market cap of $325.11M. TTM free operating cash flow/revenue at 0.31 vs. five-year average at 0.04. Dividend yield at 2.25%, payout ratio at 32.0%. TTM diluted EPS at $0.98, MRQ Book Value Per Share at $15.40, implies a Graham number of $18.43 (vs. current price at $12.42, implies a potential upside of 48.37%). The stock has lost 5.66% over the last year.

*Dividend data and free operating cash flow/revenue data sourced from Screener.co, EPS and BVPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 4 Undervalued Dividend Stocks With High Cash-Flow Growth