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Investors should pay attention to the following metrics as they could prove to be useful during the selection process.

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 jeopardising their future earnings. Ideally, the company should have a ratio of 1 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 more volatile but offer potentially higher rates of return might find this article to be of interest.

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 good and services very quickly.

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.

Investors should pay attention to the following risks associated with trusts:

  1. Cash flow is dependent on the price of the underlying commodity and production levels and thus could be subject to swings. If the swings are wide, the dividends paid out could vary widely from year to year.
  2. While investing in royalty trusts can yield steady and hefty returns, there is one potential drawback: Depletion. These trusts own royalties on a finite amount of resources, and once those resources are gone; the trust is also gone. Investors need to understand that the distributions will eventually decline and disappear. It is essential that you do your due diligence before opening a position in the trusts that are discussed in this article.

Important facts investors should be aware in regards to investing in MLP's and REITS

  1. Payout ratios are not that important when it comes to MLPS/REITS. Both 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 and REITS is often higher than 100%. The more important ratio to focus on 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/dividend declared per unit/share.
  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.

  3. MLPs issue a Schedule K-1 to their 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 401KS and IRAs if the income generated is in excess of $1000.

Two other notable plays are BB&T Corporation Common Stock (BBT) and Seadrill Limited Ordinary Shares (SDRL), with yields of 2.4% and 8.6% respectively.

BB&T has a very strong quarterly earning's growth rate of 74%. BB&T has been paying dividends since 1934 and has consecutively increased its dividends for 40 years in a row. Net income for the past three year is as follows. In 2008, it reported a net income of $1.5 billion, in 2009 it dropped to $853 million and in 2010, it dropped again to $ 816 million. For 2011, net income so far is roughly $898 million, and if it maintains this pace, then net income for 2011 could come in as high as $1.2 billion. Out of a possible five stars, we would assign BB&T a full five.

Seadrill has an enterprise value of $25.8 billion, an incredibly strong three-year dividend growth rate of 115%, and a quarterly revenue growth rate of -3.7%, and a very impressive total rate of return for the last three years of 420%. It has been paying dividends since 2008, has an operating cash flow of $1.7 billion, a ROE of 31%, a price/book of 2.31, price/sales of 4.75, a price/cash flow of 7.50, a price to tangible book of 2.91, earnings per share of 3.06 and sales per share of 6.71.

A special dividend of 76 cents was announced on the 8th of December. Seadrill is growing at an annual rate of 12%, and it is projected that it will be able to maintain this rate for the next five years. Seadrill also sports a high beta, which makes it a great candidate to write covered calls. Covered calls open up a second stream of income, and in many cases can generate even more income on annual basis then the dividend payments.

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

APU

7.10%

2.35B

13.87

335.44M

20.80%

0.27

2.54B

36.76

AKR

3.70%

792.97M

18.55

95.82M

7.30%

1.19

170.48M

60.92M

IRET

8.20%

616.99M

10.96

130.17M

3.10%

0.43

239.69M

64.40M

CTEL

7.20%

394.44M

7.45

76.11M

8.50%

1.39

216.48M

75.43M

FUN

4.30%

1.28B

10.54

358.43M

5.00%

1.28

1.01B

193.37M

AmeriGas Partners, L.P. (APU)

Industry : Gas Utilities

Net income for the past three years

  1. 2008= $224.6 million
  2. 2009 = $165.2 million
  3. 2010= $138.5 million
  4. 20011= net income so far is roughly -$95 million

Total cash flow from operating activities

  1. 2008= $367.4 million
  2. 2009 =$218.8 million
  3. 2010 =$188.5 million

Potential warnings

Net income and total cash flow has been dropping for the past 3 years.

Key Ratios

• Price to sale 10.1

• Price to tangible book 0

• Price to cash flow 7.2

• Price to free cash flow 7.7

• 5 year sales growth 2.66

• Inventory turnover 0

• Asset turnover 0

• ROE 37.86%

• Return on assets 8.62%

• 200 day moving average 0

• Total debt 0

• Book value -0.1846

• Dividend yield 5 year Average 7.10%

• Dividend rate $ 2.93 %

• Payout ratio 127.00%

• Dividend growth rate 3 year average 5.08%

• Dividend growth rate 5 year average 5.20%

• Consecutive dividend increases 1 years

• Paying dividends since 1995

• Total return last 3 years 68.57%

• Total return last 5 years 74.12%

Acadia Realty Trust (AKR)

Industry: REITs

Net income for the past three years

  1. 2008= $27.5 million
  2. 2009 = $31.3 million
  3. 2010= $30. million
  4. 20011= net income so far is roughly $40 million and could come in as high as $60 million if it can match the net income generated in the second quarter of 2011.

Total cash flow from operating activities

  1. 2008= $65.8million
  2. 2009 =$47.4 million
  3. 2010 =$44.3 million
  4. 2011= it stands at roughly $40 million and could top $58 million.

Key Ratios

• Price to sale 16.3

• Price to tangible book 0

• Price to cash flow 3.7

• Price to free cash flow 4.1

• 5 year sales growth 12.5

• Inventory turnover 0

• Asset turnover 0

• ROE 3.81%

• Return on assets 2.24%

• 200 day moving average 19.95

• Total debt 875.12M

• Book value 8.4

• Dividend yield 5 year Average 4.30%

• Dividend rate $ 0.72 %

• Payout ratio 138.00%

• Dividend growth rate 3 year average -16.68%

• Dividend growth rate 5 year average 4.27%

• Consecutive dividend increases 0 years

• Paying dividends since 1993

• Total return last 3 years 62.21%

• Total return last 5 years -2.56%

Investors Real Estate Trust (IRET)

Industry: REITs

Key Ratios

Net income for the past three years

  1. 2008= $8.5 million
  2. 2009 = $4.00 million
  3. 2010= $20.085 million
  4. 20011= so far it stands at$2.74 million and could come in as high as $4.1 million

Total cash flow from operating activities

  1. 2008= $60 million
  2. 2009 =$61 million
  3. 2010 =$58.7 million
  4. 2011= it stands at $44 million and could top the $57 million mark.

Potential warnings

Net income has taken a massive beating in 2011 and total cash flow from operating activities has been dropping for the past 3 years and appears to be on course to drop again in 2011.

• Price to sale 39.6

• Price to tangible book 0

• Price to cash flow 7.1

• Price to free cash flow 7.1

• 5 year sales growth N.A.

• Inventory turnover 0

• Asset turnover 0

• ROE 0.61%

• Return on assets 2.64%

• 200 day moving average 7.52

• Total debt 1.09B

• Book value 4.57

• Dividend yield 5 year Average 7.50%

• Dividend rate $ 0.60 %

• Payout ratio 402.00%

• Dividend growth rate 3 year average -3.49%

• Dividend growth rate 5 year average -1.61%

• Consecutive dividend increases 0 years

• Paying dividends since 1998

• Total return last 3 years -6.79%

• Total return last 5 years 4.86%

City Telecom HK Ltd (CTEL)

Industry: Services

Key Ratios

Net income for the past three years

  1. 2009= $27.4 Million
  2. 2010 = $27.8 Million
  3. 2011= $40.3million

Total cash flow from operating activities

  1. 2009= $69.2 million
  2. 2010 =$62.3 million
  3. 2011 =$75.2 million

• Price to sale 5.4

• Price to tangible book 0

• Price to cash flow 7.2

• Price to free cash flow 5.2

• 5 year sales growth N.A.

• Inventory turnover 0

• Asset turnover 0

• ROE 18.01%

• Return on assets 10.32%

• 200 day moving average 10.27

• Total debt 1.65M

• Book value 6

• Dividend yield 5 year Average 4.60%

• Dividend rate $ 0.73 %

• Payout ratio 169.00%

• Dividend growth rate 3 year average 98.63%

• Dividend growth rate 5 year average 0.00%

• Consecutive dividend increases 2 years

• Paying dividends since 1999

• Total return last 3 years 353.32%

• Total return last 5 years 236.85%

Cedar Fair, L.P. (FUN)

Industry: Sporting & Recreational

Key Ratios

Net income for the past three years

  1. 2008= $5.7million
  2. 2009 = $35.4 million
  3. 2010= -$31.55 million
  4. 20011= so far it stands at$ 9 million; net income has turned positive after being in the red for 2010.

Total cash flow from operating activities

  1. 2008= $60 million
  2. 2009 =$61 million
  3. 2010 =$58.7 million
  4. 2011= it stands at $213 million and could end the year in the $190-$240 million ranges.

• Price to sale 9

• Price to tangible book 0

• Price to cash flow 12.1

• Price to free cash flow 9.3

• 5 year sales growth -11.94

• Inventory turnover 0

• Asset turnover 0

• ROE 4.83%

• Return on assets 6.71%

• 200 day moving average 20.35

• Total debt 1.59B

• Book value 3.58

• Dividend yield 5 year Average 7.90%

• Dividend rate $ 1.00 %

• Payout ratio 666.00%

• Dividend growth rate 3 year average 61.52%

• Dividend growth rate 5 year average 37.39%

• Consecutive dividend increases 1 years

• Paying dividends since 1990

• Total return last 3 years 88.40%

• Total return last 5 years 5.51%

Conclusion

Conclusion

Our two favourites on this list are City Telecom and Seadrill. City Telecom sports a strong quarterly earning's growth rate of 45.6%, a ROE of 18.01%, a three dividend growth rate of 98.6%, a three-year total return of 350% and its net income is starting to rise again. City Telecom has been paying dividends since 1999.

Seadrill is a bit more volatile but the long-term prospects for this play look bright. Seadrill has an incredibly strong three-year dividend growth rate of 115%, and a quarterly revenue growth rate of -3.7%, a very impressive total rate of return for the last three years of 420%, has been paying dividends since 2008, has an operating cash flow of $1.7 billion, a ROE of 31%, a price/book of 2.31, price/sales of 4.75, a price/cash flow of 7.50, a price to tangible book of 2.91, earnings per share of 3.06 and sales per share of 6.71. As it sports a high beta, investors can open an extra stream of income by selling covered calls.

The markets are entering a volatile phase. The charts are indicating that another top could be close at hand, this top is projected to be in place around the 18-21st of this month. Our paid subscribers have been reaping huge gains as we have timed every top and bottom accurately for the past 12 months. You can read some of our recent calls here.

On the 16th we made the following comments:

  1. On a short-term basis, the Dow has put in a bottom and is getting ready to challenge the 12,000 ranges again. However, there is a chance that the recent lows could be tested before the rally gathers steam. Going out a little further, the cycles suggest that the Dow should be able to rally until early next year and there is a fairly good chance that the Dow could trade to the 12,800 range and the and the SPX could trade to the 1305-1330 plus range with the possibility of mounting an intra-day spike to the 1340 range. The dollar is overbought and has generated a few sell signals on the hourly time frames, so a pullback here would help drive commodities and the general market higher.

In a recent article that was written on the 26th but published on the 27th of December, we made the following comments:

Going forward, we think that the markets could put in a short term top around the 27-29th of this month. The pullback should provide traders with a good opportunity to open up long positions.

While we still feel that the SPX could trade to the 1300-1320 ranges, our advice to long term traders would be to sit on the sidelines waiting for opportune moments to present themselves before deploying large sums of money into this market. Fixed income investors can hedge themselves to some degree by selling covered calls. A more aggressive option would be to purchase long term puts to hedge your portfolio against a potentially strong sell off.

Almost 7 days before the market bottomed, we stated the following in the conclusion section of the best of the best dividend champion series (part III):

The markets are currently very choppy and current pattern is projecting a volatile ride until about the 23rd of this month. After that the markets are expected to mount a pretty strong rally as the dollar is projected to pull back and consolidate before building up steam for another strong leg up. Potentially the strength in the dollar could surprise everyone next year. As a result, it would make sense to wait until the 23rd or so of the month before deploying new funds into the above plays.

We feel that dividend investors would be best served by waiting for a strong pull back before committing additional funds to this market.

All charts sourced from dividata.com

Source: 7 Stocks With Attractive Yields As High As 8.6%

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. 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.