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When it comes to dividend investing, investors would do well to pay attention to some of the following key metrics as they could prove to be of great assistance during the selection process.

Turnover Ratio lets you know the number of times a company's inventory is replaced in a given time period. It is calculated by dividing the cost of goods sold by average inventory during the time period studied. A high turnover ratio indicates that a company is producing and selling its goods and services very quickly.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardizing future earnings. Ideally the company should have a ratio of one or higher.

Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt. The cash flow is what pays the bills.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa. Individuals looking for stocks that are less volatile in nature and have stellar dividend histories might find the following article to be of interest: Dividend Aristocrats With Great Yields Part II.

The payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders than they are making. This situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for sometime.

Enterprise value is a combination of the market cap, debt, minority interests, preferred shares less total cash and cash equivalents. This provides a better picture because it is a more accurate representation of a company's value contrary to simply looking at the market cap.

Important facts investors should be aware of in regard to investing in MLPs:

  1. Payout ratios are not that important when it comes to MLPs. MLPs are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend rate by the net income per share, and this is why the payout ratio for MLPs is often higher than 100%. The more important ratio to focus on as far as MLPs are concerned is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution declared per unit.
  2. MLPs are not taxed like regular corporations because they pay out a large portion of their income to partners (as an investor you are basically a partner and are allocated units instead of shares) usually through quarterly distributions. The burden is thus shifted to the partners who are taxed at their ordinary income rates. As ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and generally most investors.
  1. MLPs issue a Schedule K-1 to investors. If the MLP pays out distributions in excess of the income it generates, the distribution is classified as a "return of capital" and tax deferred until you sell your shares or units. Income from MLPs is generally taxable even in retirement accounts like a 401K and IRAs if the income generated is in excess of $1,000.

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

LINE

7.70%

6.35B

16

1.10B

32.8%

0.69

792M

573M

VGR

9.10%

1.38B

18

143.1M

1.90%

0.38

546M

29.9M

KMP

5.6%

27.7B

35

2.64B

6.6%

0.36

8.13B

2.87B

TOT

5.5%

111.88B

7.14

39.62B

17.90%

1.18

202.51B

25.58B

STO

4.40%

79.55B

8.99

37.22B

32.20%

1.07

101.67B

15.14B

Linn Energy LLC (NASDAQ:LINE)

Its mission is to acquire and develop a growing portfolio of long life oil and natural gas assets and in the process maximize cash flow. LINE has grown from a company that managed a handful of wells to a multi-billion dollar entity that is among the top 20 independent oil and natural gas development companies in the U.S. It managed to increased production by roughly 30% in 2011, and is planning on increasing production by another 40% for 2012.

LINE has an enterprise value of $9.64 billion, a five-year dividend growth rate of 22.45%, a quarterly revenue growth rate of 32%, a five-year dividend average of 10.70, a total rate of return for the last three years of 257%, a dividend rate of $2.76 and has been paying dividends since 2006. Finally, it has a positive levered free cash flow rate of $189 million.

Net income for the past three years:

  1. 2008 - It reported a net income of $ 999.6 million
  2. 2009 - Net income dropped to -$298 million
  3. 2010 - It rose to -$114.2 million
  4. 2011 - Net income so far has surged to $1.07 billion and it could top the $1.3-$1.8 billion mark

Potentially positive developments:

In the third quarter Linn Energy announced that it purchased over 500,000 shares at an average price of $32.76.

Insider Transactions

Director T. Jacobs purchased 30,000 shares in Aug at 32.76-34.00 a share. Director A. Walker purchased 4,000 shares at 31.76-32.85 a share on the 8th of August. Officer Mark Ellis purchased 5,000 shares at $32.76 a share. The full list of insider transactions can be accessed here.

Key Ratios

• Price to sale 3.38

• Price to tangible book 1.71

• Price to cash flow 8.90

• Price to free cash flow -3.70

• 5 year sales growth 30.83

• Inventory turnover N.A.

• Asset turnover 0.30

  1. ROE 11.9
  2. Return on assets 6.96%
  3. Total debt $ 3.12B
  4. Book value $21.00
  5. 200 day moving average $37.41
  6. Dividend rate $2.76
  7. Payout ratio 169%

  1. Dividend yield 5 year average 10.7%
  2. Dividend growth rate 5 year average 22.45%
  3. Consecutive dividend increases 1 year
  4. Paying dividends since 2006
  5. Total return last 3 years 173%
  6. Total return last 5 years 55%

Vector Group Ltd. (NYSE:VGR)

VGR has an enterprise value of $1.52 billion, a quarterly earnings growth rate of 60.9%, a five-year EPS growth of 5.28%, a total three-year return of 93%, EPS of 0.94, cash flow per share of11.18, price/sales of 1.24, and a price/cash flow of 14.90. VGR also has a levered free cash flow rate of 58.19 million. Out of a possible five stars, we would assign VGR four stars. The dividend was increased from $0.3809 to $.4000.

Net income for the past three years is as follows: In 2008, it was $60 million, in 2009 it dropped to $24.8 million and in 2010, it doubled to $54 million. For 2011, it stands at $66 million.

Insider Transactions

Insiders purchased roughly 6.1 million shares at $17.17 per share in Nov 2011. Carl Ichan sold 10.8 million shares at 17.71 also on the month of November. The full list of insider transactions can be accessed here.

Key ratios:

  1. Price to tangible book - 7.98
  2. Price to cash flow 14.90
  3. Price to free cash flow -11.10
  4. 5 year sales growth 19.45
  5. Inventory turnover 8.20
  6. Asset turnover 1.20

  1. Return on assets of 9.26%
  2. Total debt $ 517 million
  3. 200 day moving average $ 17.78
  4. Book value -$0.84
  5. Dividend yield 5 year average 9.5%
  6. Dividend rate $1.60
  7. Payout ratio 163%
  8. Dividend growth rate 5 year average 5.00%
  9. Consecutive dividend increases 13 years
  10. Paying dividends since 1990
  11. Total return last 3 years 88%
  12. Total return last 5 years 77%

Kinder Morgan Energy Partners (NYSE:KMP)

It has an enterprise value of $41 billion, quarterly revenue growth of 6.6%, a ROE of 15.97%, a five-year dividend growth rate of 7.31%, a total return of 117% for the past three years, and has been paying dividends since 1992. It has a levered free cash flow rate of $265 million. Out of a possible five stars, we would assign KMP four.

Net income for the past three years is as follows:

  1. 2008 $1.3 billion
  2. 2009 $1.26 billion
  3. 2010 $1.31 billion
  4. 2011 net income so far stands at $782 billion and could probably top the $1.1 billion mark.

Key ratios:

  1. Price to tangible book 3.66
  2. Price to cash flow 19.10
  3. Price to free cash flow -5.70
  4. 5 year sales growth -3.95%
  5. Inventory turnover 134.5
  6. Asset turnover 0.4

  1. ROE 15.97%
  2. Return on assets 4.67%
  3. Total debt $13.6B
  4. 200 day moving average $ 73.99
  5. Book value $22.16
  6. Dividend yield 5 year average 6.7%
  7. Dividend rate $4.58
  8. Dividend growth rate 5 year average 7.31%
  9. Consecutive dividend increases 14 years
  10. Paying dividends since 1992
  11. Total return last 3 years 114%
  12. Total return last 5 years 96%

Total S.A. (NYSE:TOT)

Industry: Production and extraction.

Net income for the past three years:

  1. 2008 - It reported a net income of $15 billion
  2. 2009 - Net income dropped to $261 million
  3. 2010 - It dropped again to $317 million

Total cash flow from operating activities has been strong enough for the past three years to cover all the dividend payments. In 2008 it came in at $26 billion, in 2009 it dropped to $17 billion and in 2010 it rose to $24.8 billion.

Key Ratios

• Price to sale 0.65

• Price to tangible book 1.53

• Price to cash flow 4.4

• Price to free cash flow -21.4

• 5 year sales growth -1.42

• Inventory turnover 5.6

• Asset turnover 0.9

• ROE 19.62%

• Return on assets 9.94%

• 200 day moving average 49.84

• Total debt 41.81B

• Book value 36.72

• Dividend yield 5 year average 5.10%

• Dividend rate $ 4.15 %

• Payout ratio 83.00%

• Dividend growth rate 5 year 12.12%

• Consecutive dividend increases 0 years

• Paying dividends since 1992

• Total return last 3 years 12.82%

• Total return last 5 years -3.68%

Statoil ASA (NYSE:STO)

Industry: Refining and marketing.

Net income for the past three years:

  1. 2008 - It reported a net income of $ 6.15 billion
  2. 2009 - Net income dropped to $ 3 billion
  3. 2010 - It dropped rose to $6.47 billion

Key ratios:

• Price to sale 0.93

• Price to tangible book 2.38

• Price to cash flow 4.4

• Price to free cash flow -51.8

• 5 year sales growth 3.71

• Inventory turnover 12.2

• Asset turnover 0.8

• ROE 26.60%

• Return on assets 16.40%

• 200 day moving average 24.2

• Total debt 19.76B

• Book value 13.20

• Dividend yield 5 year average 3.80%

• Dividend rate $ 1.15 %

• Payout ratio 34.00%

• Dividend growth rate 5 3.34%

• Consecutive dividend increases 1 years

• Paying dividends since 2002

• Total return last 3 years 73.50%

• Total return last 5 years 30.49%

Conclusion

Our favorite plays on this list are Vector Group and Linn Energy LLC. VGR has an enterprise value of $1.52 billion, a quarterly earnings growth rate of 60.9%, a five-year EPS growth of 5.28%, a total three-year return of 93%, a EPS of 0.94, cash flow per share of 11.18, price/sales of 1.24, and a price/cash flow of 14.90. VGR also has a levered free cash flow rate of 58.19 million. Out of a possible five stars, we would assign VGR four stars. It has consecutively increased its dividends for 13 years and has been paying dividends since 1990. The dividend was increased from $0.3809 to $.4000. As long as VGR does not close below 17.00 on a weekly basis the outlook will remain bullish. A weekly close above 18.50 should lead to a series of new highs.

LINE has an enterprise value of $9.64 billion, a five-year dividend growth rate of 22.45%, a quarterly revenue growth rate of 32%, a five-year dividend average of 10.70, a total rate of return for the last three years of 257%, a dividend rate of $2.76 and has been paying dividends since 2006. Finally, it has positive levered free cash flow rate of $189 million. It increased production by roughly 30% in 2011, and is planning on increasing production by another 40% for 2012.

Two other notable plays are Southern Copper Corp (NYSE:SCCO) and Atlas Pipeline Partners LP (NYSE:APL), with yields of 7.6% and 5.6%, respectively.

APL has an enterprise value of $2.36 billion, a quarterly revenue growth rate of 53%, a quarterly earnings growth rate of -83%, a ROE of 24.75%, a strong five-year distribution growth rate of 60.15%; a strong five-year dividend/ distribution average of 12.8%, a total three-year return of 476% and has been paying dividend/distributions since 200. It has an operating cash flow of $85.8 million and a levered free cash flow rate of- $60.55. The dividend was increased from $0.47 to $0.54. APL also sports a low payout ratio of 31% and a rather high beta of 1.48 which makes it a good candidate for covered writes.

Net income for the past three years is as follows: In 2008, it was -$581 million; in 2009, it turned positive and surged to $62 million; in 2010, it more than quadrupled to $280 million. Net income for 2011 is roughly $300 million. The distribution was increased by 7 cents from 47 cents to 54 cents.

SCCO has an enterprise value of $27.34 billion, a quarterly revenue growth rate of 38%, an impressive quarterly earnings growth rate of 81% a ROE of 57.3%, a very impressive five-year dividend growth rate of 53%, a total three-year return of 148%, and has been paying dividends since 1996. It has a strong levered free cash flow rate of $1.53 billion. The dividend was increased from $0.60 to $0.70, and so far it has consecutively increased its dividend for two years.

Net income for the past three years is as follows: In 2008, it came in at $1.4 billion, in 2009 it dropped to $929 million and in 2010, it surged to $1.54 billion. For 2011, it stands at $1.8 billion. SCCO has a payout ratio of 81%. SCCO has a payout ratio of $81 and also sports a high beta of 1.59, making it another good candidate for covered writes.

All charts were sourced from dividata.com.

Source: Dividend Champs With Yields As High As 9.1%

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before investing any capital in them. Some investors are happy with taking enormous amounts of risks, while others are bothered by the slightest degree risk. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.