After everything the world has been through it’s still surprising when some firms completely disregard the past. Remember, what leverage did to Lehman and others? Obviously they don’t. Using a strong degree of leverage in a shaky global economy with weak profitability & offering a dividend is just asking for a repeat of the past if things get really bad again.
Operating Margin is a profitability ratio that illustrates a company’s operating efficiency & pricing strategy. A strong margin is great but should be reviewed against the company’s operating trends along with the industry average. Finding companies that have a superior and/or resilient operating margins provide one indication that they may be the best in breed.
We first screened for dividend companies that had a higher degree of leverage (Financial Leverage>5). From this narrowed pool we then screened out companies that had poor profitability (Operating Margin<5%). We did not screen out any sectors or industries.
The list is ranked from highest to lowest by Financial Leverage:
1. Prudential PLC (NYSE: PUK)
Sector | Financial Services |
Industry | Insurance - Life |
Market Cap | $26382M |
Beta | 1.81 |
Analyst Sentiment | NA |
The company offers retail financial services markets around the world. The firm’s Financial Leverage Latest Quarter is 31.7. The PUK’s Operating Margin is 4.35%. The firm’s Dividend Yield is 3.68%. The short interest for the firm is N/A as of 07/29/2011.
2. Aviva PLC (NYSE: AV)
Sector | Financial Services |
Industry | Insurance - Diversified |
Market Cap | $16834M |
Beta | 1.02 |
Analyst Sentiment | NA |
The company offers fund management, life insurance, and general insurance. The firm’s Financial Leverage latest quarter is 26.85. The PUK’s Operating Margin is 4.85%. The firm’s Dividend Yield is 6.98%. The short interest for the firm is N/A as of 07/29/2011.
3. Manulife Financial Corporation (NYSE: MFC)
Sector | Financial Services |
Industry | Insurance - Life |
Market Cap | $24853M |
Beta | 2.24 |
Analyst Sentiment | 10/16 -List Buy/Outperform (Bullish) |
The company offers variable annuities, life insurance, and other wealth-management products. The firm’s Financial Leverage latest quarter is 18.43. The MFC’s Operating Margin is -3.11%. The firm’s Dividend Yield is 3.75%. The short interest for the firm is N/A as of 07/29/2011.
4. Blackstone Group LP (NYSE: BX)
Sector | Financial Services |
Industry | Asset Management |
Market Cap | $6543M |
Beta | 2.34 |
Analyst Sentiment | 7/10 -List Buy/Outperform (Bullish) |
The company offers alternative asset management services ranging in areas from corporate private equity funds to proprietary hedge funds. The firm’s Financial Leverage latest quarter is 13.62. The BX’s Operating Margin is -32.85%. The firm’s Dividend Yield is 4.52%. The short interest for the firm is 2.7% as of 07/29/2011.
5. Brunswick Corporation (NYSE: BC)
Sector | Consumer Cyclical |
Industry | Leisure |
Market Cap | $1455M |
Beta | 3.39 |
Analyst Sentiment | 5/7 -List Buy/Outperform (Bullish) |
The company manufactures and sells marine parts, boats, consumer products, and more. The firm’s Financial Leverage latest quarter is 13.27. The BS’s Operating Margin is 0.48%. The firm’s Dividend Yield is 0.31%. The short interest for the firm is 20.7% as of 07/29/2011.
6. Crosstex Energy, Inc. (NASDAQ: XTXI)
Sector | Energy |
Industry | Oil & Gas Midstream |
Market Cap | $485M |
Beta | 2.24 |
Analyst Sentiment | 3/3 -List Hold/Neutral (Neutral) |
The company gathers, transmits, treats, processes and markets NLG’s and natural gas. The firm’s Financial Leverage latest quarter is 11.54. The XTXI’s Operating Margin is 4.12%. The firm’s Dividend Yield is 3.3%. The short interest for the firm is 6.3% as of 07/29/2011.
7. SUPERVALU Inc (NYSE: SVU)
Sector | Consumer Defensive |
Industry | Grocery Stores |
Market Cap | $1545M |
Beta | 1.06 |
Analyst Sentiment | 11/14 -List Buy/Outperform (Bullish) |
The company operates food distribution and grocery markets in the U.S. The firm’s Financial Leverage latest quarter is 9.64. The SVU’s Operating Margin is -2.6%. The firm’s Dividend Yield is 4.81%. The short interest for the firm is 20.3% as of 07/29/2011.
8. AK Steel ing Corporation (NYSE: AKS)
Sector | Basic Matls |
Industry | Steel |
Market Cap | $971M |
Beta | 2.86 |
Analyst Sentiment | 10/16 -List Buy/Outperform (Bullish) |
The company produces flat-rolled, electrical steels, and stainless steel. The firm’s Financial Leverage latest quarter is 7.05. The AKS’s Operating Margin is -2.24%. The firm’s Dividend Yield is 2.27%. The short interest for the firm is 15.1% as of 07/29/2011.
9. The Allstate Corp (NYSE: ALL)
Sector | Financial Services |
Industry | Insurance - Property & Casualty |
Market Cap | $13261M |
Beta | 1.62 |
Analyst Sentiment | 15/24 -List Hold/Neutral (Neutral) |
The company offers retirement products, life insurance, auto-insurance, & property-liability insurance. The firm’s Financial Leverage latest quarter is 6.88. The ALL’s Operating Margin is 3.55%. The firm’s Dividend Yield is 3.19%. The short interest for the firm is 1.5% as of 07/29/2011.
10. Energy Solutions, Inc. (NYSE: ES)
Sector | Industrials |
Industry | Waste Management |
Market Cap | $306M |
Beta | 1.37 |
Analyst Sentiment | 4/6 -List Buy/Outperform (Bullish) |
The company offers technology-based nuclear services to governments and private clients worldwide. The firm’s Financial Leverage latest quarter is 6.7. The ES’s Operating Margin is 2.52%. The firm’s Dividend Yield is 0.72%. The short interest for the firm is 7% as of 07/29/2011.
We hope this list helps as investors do their own due diligence on firms with a high degree of leverage and poor profitability.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
