Inventory can give a very helpful look into the operational health of a company, especially when compared to revenue growth.
We ran a screen on dividend champions (i.e. stocks that have consistently raised their dividend over the last 25 years) for those that have exhibited encouraging inventory trends year-over-year: Increases in quarterly revenue exceeding increases in quarterly inventory year-over-year, as well as inventory becoming a smaller portion of current assets.
To help understand why these trends are positive, think of why the opposite trends would be negative. If inventory were growing faster than revenue, it would probably indicate that the company is having trouble selling its inventory.
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.
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Do you think these companies have healthy operations? Use this list as a starting point for your own analysis.
List sorted by dividend yield.
1. The Coca-Cola Company (KO): Distributes and markets non-alcoholic beverages worldwide. Market cap of $159.28B. Dividend yield at 2.71%, payout ratio at 33.38%. MRQ revenue has increased 46.84% ($12,737M vs. $8,674M y/y) while MRQ inventory has increased 36.99% ($3,237M vs. $2,363M y/y). Inventory/current assets has decreased from 12.72% to 12.20%, comparing three months ending 2011-07-01 to three months ending 2010-07-02. The stock has gained 22.02% over the last year.
2. The McGraw-Hill Companies, Inc. (MHP): Provides various information services for financial, educational and business information markets worldwide. Market cap of $11.67B. Dividend yield at 2.58%, payout ratio at 34.22%. MRQ revenue has increased 7.24% ($1,580.8M vs. $1,474.06M y/y) while MRQ inventory has increased 0.19% ($340.3M vs. $339.65M y/y). Inventory/current assets has decreased from 11.68% to 10.88%, comparing three months ending 2011-06-30 to three months ending 2010-06-30. It has been a rough couple of days for the stock, losing 6.81% over the last week. The stock has had a good month, gaining 10.25%.
3. Lancaster Colony Corporation (LANC): Engages in the manufacture and marketing of consumer products focusing primarily on specialty foods for the retail and foodservice markets in the United States. Market cap of $1.59B. Dividend yield at 2.27%, payout ratio at 33.52%. MRQ revenue has increased 3.24% ($256.03M vs. $248M y/y) while MRQ inventory has decreased 7.92% ($111.89M vs. $121.51M y/y). Inventory/current assets has decreased from 38.28% to 33.58%, comparing three months ending 2011-06-30 to three months ending 2010-06-30. The stock is a short squeeze candidate, with a short float at 13.9% (equivalent to 24.02 days of average volume). The stock has gained 29.75% over the last year.
4. Carlisle Companies Inc. (CSL): Carlisle Companies Incorporated manufactures construction materials in the United States and internationally. Market cap of $2.15B. Dividend yield at 2.06%, payout ratio at 26.92%. MRQ revenue has increased 26.64% ($870.8M vs. $687.6M y/y) while MRQ inventory has increased 22.33% ($444.3M vs. $363.2M y/y). Inventory/current assets has decreased from 38.59% to 36.78%, comparing three months ending 2011-06-30 to three months ending 2010-06-30. It has been a rough couple of days for the stock, losing 8.45% over the last week.
*Accounting data sourced from Google 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.