12 Outperforming Dividend Stocks With Strong Sources Of Profitability

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 |  Includes: CHD, ITC, JKHY, JWN, KLAC, M, PEG, RAVN, ROST, SMP, TSS, WEC
by: Kapitall

Over the last three months, the S&P 500 has fallen roughly 9.6%, yet some stocks have managed to buck the trend and move higher.

We wanted to analyze these stocks by running DuPont analysis on their sources of profitability, as measured by return on equity.

ROE can be broken up into three components such that increases in ROE can be attributed to those components.

ROE
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Analyzing the sources of returns for a company, we can focus on companies with the following characteristics: Increasing ROE along with,

• Decreasing leverage, i.e. decreasing Asset/Equity ratio
• Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

We ran DuPont analysis on dividend stocks that have moved higher over the latest quarter.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six 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 have strong profitability? Use this list as a starting-off point for your own analysis.

List sorted by increase in ROE.

1. KLA-Tencor Corporation (NASDAQ:KLAC): Engages in the design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Market cap of $7.29B. Dividend yield at 3.20%, payout ratio at 21.07%. The stock has gained 4.22% over the past quarter. MRQ Net Profit Margin increased to 27.46% from 20.21% year-over-year, Sales/Assets increased to 0.19 from 0.14, while Assets/Equity decreased to 1.63 from 1.74. The stock has had a good month, gaining 12.84%.

2. Standard Motor Products Inc. (NYSE:SMP): Distributes replacement parts for motor vehicles in the automotive aftermarket industry primarily in the United States, Canada, and Latin America. Market cap of $355.71M. Dividend yield at 1.80%, payout ratio at 15.80%. The stock has gained 0.58% over the past quarter. MRQ Net Profit Margin increased to 5.47% from 3.33% year-over-year, Sales/Assets increased to 0.45 from 0.42, while Assets/Equity decreased to 2.30 from 2.73. This is a risky stock that is significantly more volatile than the overall market (beta = 2.31). Exhibiting strong upside momentum--currently trading 12.1% above its SMA20, 20.46% above its SMA50, and 16.6% above its SMA200. The stock has had a good month, gaining 12.61%.

3. Raven Industries Inc. (NASDAQ:RAVN): Manufactures products for industrial, agricultural, construction, and military/aerospace markets in North America. Market cap of $1.10B. Dividend yield at 1.19%, payout ratio at 25.91%. The stock has gained 9.19% over the past quarter. MRQ Net Profit Margin increased to 13.79% from 11.41% year-over-year, Sales/Assets increased to 0.43 from 0.38, while Assets/Equity decreased to 1.2876 from 1.2917. Exhibiting strong upside momentum--currently trading 17.08% above its SMA20, 19.61% above its SMA50, and 15.77% above its SMA200. The stock has had a couple of great days, gaining 9.53% over the last week.

4. Macy's, Inc. (NYSE:M): Operates department stores and Internet Web sites in the United States. Market cap of $12.80B. Dividend yield at 1.34%, payout ratio at 12.16%. The stock has gained 1.63% over the past quarter. MRQ Net Profit Margin increased to 4.06% from 2.65% year-over-year, Sales/Assets increased to 0.29 from 0.27, while Assets/Equity decreased to 3.44 from 4.22. Exhibiting strong upside momentum--currently trading 10.77% above its SMA20, 15.25% above its SMA50, and 16.44% above its SMA200. The stock has had a couple of great days, gaining 7.23% over the last week.

5. Public Service Enterprise Group Inc. (NYSE:PEG): Operates in the energy industry primarily in the northeastern and mid Atlantic United States. Market cap of $16.71B. Dividend yield at 4.15%, payout ratio at 42.80%. The stock has gained 4.43% over the past quarter. MRQ Net Profit Margin increased to 13.08% from 9.49% year-over-year, Sales/Assets increased to 0.09 from 0.08, while Assets/Equity decreased to 2.85 from 3.15. The stock has gained 3.48% over the last year.

6. Wisconsin Energy Corp. (NYSE:WEC): Engages in the generation, distribution, and sale of electric energy and steam. Market cap of $7.48B. Dividend yield at 3.25%, payout ratio at 42.43%. The stock has gained 2.40% over the past quarter. MRQ Net Profit Margin increased to 11.04% from 9.96% year-over-year, Sales/Assets increased to 0.08 from 0.07, while Assets/Equity decreased to 3.29 from 3.42. The stock has gained 12.72% over the last year.

7. Nordstrom Inc. (NYSE:JWN): A fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap of $11.05B. Dividend yield at 1.77%, payout ratio at 29.66%. The stock has gained 2.06% over the past quarter. MRQ Net Profit Margin increased to 6.23% from 5.81% year-over-year, Sales/Assets increased to 0.36 from 0.34, while Assets/Equity decreased to 3.86 from 4.03. Exhibiting strong upside momentum--currently trading 8.52% above its SMA20, 15.46% above its SMA50, and 15.51% above its SMA200. The stock has had a couple of great days, gaining 5.5% over the last week.

8. ITC Holdings Corp. (NYSE:ITC): Engages in the transmission of electricity in the United States. Market cap of $3.73B. Dividend yield at 1.94%, payout ratio at 43.31%. The stock has gained 1.98% over the past quarter. MRQ Net Profit Margin increased to 23.23% from 21.55% year-over-year, Sales/Assets increased to 0.0407 from 0.0403, while Assets/Equity decreased to 3.82 from 3.96. The stock is a short squeeze candidate, with a short float at 5.36% (equivalent to 7.29 days of average volume). The stock has gained 20.92% over the last year.

9. Church & Dwight Co. Inc. (NYSE:CHD): Develops, manufactures, and markets a range of household, personal care, and specialty products under various brand names in the United States and internationally. Market cap of $6.30B. Dividend yield at 1.55%, payout ratio at 25.75%. The stock has gained 3.46% over the past quarter. MRQ Net Profit Margin increased to 12.24% from 11.59% year-over-year, Sales/Assets increased to 0.22 from 0.21, while Assets/Equity decreased to 1.50 from 1.78. The stock has gained 30.85% over the last year.

10. Jack Henry & Associates Inc. (NASDAQ:JKHY): Provides integrated computer systems and services for in-house and outsourced data processing to commercial banks, credit unions, and other financial institutions primarily in the United States. Market cap of $2.72B. Dividend yield at 1.34%, payout ratio at 25.05%. The stock has gained 4.13% over the past quarter. MRQ Net Profit Margin increased to 14.67% from 13.16% year-over-year, Sales/Assets increased to 0.17 from 0.15, while Assets/Equity decreased to 1.71 from 2.08. The stock has gained 21.18% over the last year.

11. Total System Services, Inc. (NYSE:TSS): Provides electronic payment processing and other services to card-issuing and merchant acquiring institutions. Market cap of $3.63B. Dividend yield at 1.49%, payout ratio at 27.56%. The stock has gained 4.26% over the past quarter. MRQ Net Profit Margin increased to 12.01% from 11.53% year-over-year, Sales/Assets increased to 0.24 from 0.23, while Assets/Equity decreased to 1.40 from 1.53. The stock has gained 22.02% over the last year.

12. Ross Stores Inc. (NASDAQ:ROST): Operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the United States. Market cap of $9.81B. Dividend yield at 1.04%, payout ratio at 14.78%. The stock has gained 10.18% over the past quarter. MRQ Net Profit Margin increased to 7.10% from 6.76% year-over-year, Sales/Assets increased to 0.68 from 0.67, while Assets/Equity decreased to 2.14 from 2.27. Exhibiting strong upside momentum--currently trading 5.02% above its SMA20, 10.71% above its SMA50, and 14.8% above its SMA200. The stock has gained 51.79% over the last year.

*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.