If you’re looking for ideas on how to search for dividend stocks, you may be interested in this list.
We ran DuPont analysis on the sources of profitability for stocks seeing rapid dividend growth year-over-year.
ROE profitability 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.
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.
click to enlarge
Do you think these stocks pay reliable dividends? Use this list as a starting-off point for your own analysis.
List sorted by change in ROE.
1. KLA-Tencor Corporation (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 $7.46B. Dividend yield at 3.12%, payout ratio at 21.07%. Current year dividend per share estimate at $1.24 vs. TTM dividend per share at $1.00. 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 18.79%.
2. El Paso Electric Co. (EE): Engages in the generation, transmission, and distribution of electricity primarily in west Texas and southern New Mexico. Market cap of $1.36B. Dividend yield at 2.71%, payout ratio at 9.62%. Current year dividend per share estimate at $0.77 vs. TTM dividend per share at $0.22. MRQ Net Profit Margin increased to 13.60% from 10.18% year-over-year, Sales/Assets increased to 0.10 from 0.09, while Assets/Equity decreased to 2.89 from 3.04. The stock is a short squeeze candidate, with a short float at 7.38% (equivalent to 5.86 days of average volume). The stock has gained 35.76% over the last year.
3. The Dow Chemical Company (DOW): Manufactures and supplies products used as raw materials in the production of customer products and services worldwide. Market cap of $32.96B. Dividend yield at 3.78%, payout ratio at 31.29%. Current year dividend per share estimate at $0.89 vs. TTM dividend per share at $0.70. MRQ Net Profit Margin increased to 6.65% from 4.78% year-over-year, Sales/Assets increased to 0.23 from 0.21, while Assets/Equity decreased to 2.83 from 3.15. This is a risky stock that is significantly more volatile than the overall market (beta = 2.32). The stock has had a couple of great days, gaining 5.16% over the last week.
4. The Interpublic Group of Companies, Inc. (IPG): Provides advertising and marketing services worldwide. Market cap of $4.19B. Dividend yield at 2.86%, payout ratio at 30.03%. Current year dividend per share estimate at $0.21 vs. TTM dividend per share at $0.18. MRQ Net Profit Margin increased to 6.01% from 5.12% year-over-year, Sales/Assets increased to 0.1415 from 0.1377, while Assets/Equity decreased to 4.99 from 5.39. The stock has recently rebounded, and is currently trading 8.93% above its SMA20 and 7.85% above its SMA50. However, the stock still trades 19.74% below its SMA200. The stock has had a couple of great days, gaining 17.61% over the last week.
5. Innophos Holdings Inc (IPHS): Produces and sells specialty phosphates primarily in North America. Market cap of $964.85M. Dividend yield at 2.35%, payout ratio at 29.00%. Current year dividend per share estimate at $1.00 vs. TTM dividend per share at $0.84. MRQ Net Profit Margin increased to 10.29% from 9.57% year-over-year, Sales/Assets increased to 0.3044 from 0.3004, while Assets/Equity decreased to 1.79 from 1.92. The stock has had a good month, gaining 16.57%.
*Dividend per share data sourced from Screener.co, 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.
