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Dividend investors should pay attention to some or all of the following key metrics as they could prove to be of great assistance during the selection process.

Debt to Equity Ratio is found by dividing the company's total amount of long-term debt (debts with interest rates that have a maturity longer than one year) by the total amount of equity. A debt to equity ratio of 0.5 tells us that the company is using 50 cents of liabilities in addition to each $1 dollar of shareholders equity in the business.

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 their future earnings. Ideally the company should have a ratio of 1 or higher.

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.

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 searching for other investment ideas might find this article to be of interest: "7 Relative Strength Champions With Great Upside Potential."

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.

The payout ratio tells us what portion of the profit is being returned to investors. A pay out ratio over 100% indicates that the company is paying out more money to shareholders, then 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. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever; if your tolerance for risk is a low, look for similar companies with the same or higher yields, but with lower payout ratios

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 turn over ratio indicates that a company is producing and selling its good and services very quickly.

Two additional noteworthy plays are Southern Union Company (NYSE:SUG) and Targa Resources Partners LP (NYSE:NGLS) with yields of 1.4% and 5.9% respectively.

NGLS has enterprise value of $4.8 billion a revenue growth of 40%, a quarterly earnings growth of 160%, a ROE of 16.37%, a three-year dividend growth rate of 7.03%, a five dividend average of 8.80%, has consecutively increased its dividends for four years in a row, has total three year return of 392% and has been paying dividends since 2007. It increased its dividend from $0.57 to $0.5825 and it has a levered free cash flow rate of $50.3 million.

Net income for the past three years

  1. 2008= -$91.4 million
  2. 2009 = -$12.1 million
  3. 2010= $109.1 million

  1. Price to sales 0.51
  2. Price to tangible book 2.71
  3. Price to cash flow 8.80
  4. Price to free cash flow -9.10
  5. 5 year sales growth N/A

SUG has enterprise value of $9.35 billion a revenue growth of 26.6%, a quarterly earnings growth of 55%, a ROE of 9.87%, a five-year dividend growth rate of 9.7, a five dividend average of 2.2%, has total 3 year return of 291% and has been paying dividends since 2006. It has a levered free cash flow rate of $111 million.

Net income for the past three years

  1. 2008= -$295.1 million
  2. 2009 = $179.5 million
  3. 2010= $224.5 million

  1. Price to sales 1.98
  2. Price to tangible book 2.02
  3. Price to cash flow 11.20
  4. Price to free cash flow 40.40
  5. 5 year sales growth 0.60

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

  1. Payout ratios are not that important when it comes to MLPS. 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 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 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.
  1. 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.

Stock

Dividend Yield

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

APSA

12.70%

464.27M

N/A

146.84M

3.30%

0.55

203.55M

131.55M

CEL

9.7%

1.62B

1.61

577.23M

-3.70%

0.9

1.68B

439.78M

NRGY

12.50%

2.66B

21.87

364.00M

48.70%

0.46

2.15B

114.40M

LPHI

20.20%

80.18M

N/A

2.53M

-66.90%

1.2

44.34M

3.17M

FGP

11.30%

1.33B

30.16

196.78M

34.50%

0.44

2.56B

91.38M

Alto Palermo S.A. (Argentina) (NASDAQ:APSA)

Industry: Property, Real Estate & Development

APSA has a levered free cash flow rate of $83.89 million and a quarterly earnings growth rate of 17.4%

Net income for the past three years

  1. 2008= -$5.8 million
  2. 2009 = $30.2million
  3. 2010= $63.4 million

Total cash flow from operating activities

  1. 2008= $18.8 million
  2. 2009 =$32.9million
  3. 2010 =$110.3 million

Key Ratios

• Price to sale 7.5

• Price to tangible book 0

• Price to cash flow 11.7

• Price to free cash flow 6.3

• 5 year sales growth N.A.

• Inventory turnover 0

• Asset turnover 0

• ROE 26.09%

• Return on assets 13.60%

• 200 day moving average 16.6

• Total debt 168.52M

• Book value 7.24

• Dividend yield 5 year Average 10.20%

• Dividend rate $ 1.86 %

• Payout ratio 344%

• Dividend growth rate 3 year average 38.85%

• Dividend growth rate 5 year average 18.25%

• Consecutive dividend increases 2 years

• Paying dividends since 2003

• Total return last 3 years 202.32%

• Total return last 5 years 59.05%

Cellcom Israel Ltd (NYSE:CEL)

Industry: Wireless Communications

It has a levered free cash flow rate of $278 million and a quarterly earnings growth rate of -40%.

Net income for the past three years

  1. 2008= $259 million
  2. 2009 = $312 million
  3. 2010= $365 million
  4. 20011= net income so far is roughly -$95 million

Total cash flow from operating activities

  1. 2008= $464 million
  2. 2009 =$549 million
  3. 2010 =$672 million

CEL is a volatile play and only investors willing to take on some risk should consider deploying money into this play. Having said that it's attempting to put in a bottom and a weekly close above 18 will turn the outlook bullish and should result in a test of the 22-24 ranges.

Key Ratios

• Price to sale 2.8

• Price to tangible book 0

• Price to cash flow 9.7

• Price to free cash flow N.A.

• 5 year sales growth 21.17

• Inventory turnover 0

• Asset turnover 0

• ROE 297.49%

• Return on assets 13.95%

• 200 day moving average 20.8

• Total debt 1.60B

• Book value 0.75

• Dividend yield 5 year Average 47.10%

• Dividend rate $ 10.21 %

• Payout ratio 72%

• Dividend growth rate 3 year average -11.90%

• Dividend growth rate 5 year average 0.00%

• Consecutive dividend increases 0 years

• Paying dividends since 2007

• Total return last 3 years 137.43%

• Total return last 5 years N/A %

Inergy L.P. (NRGY)

Industry: Equipment & Services

It has a levered free cash flow of $586 million and a current ratio of 1.38

Net income for the past three years

  1. 2008= -$57 million
  2. 2009 = $61 million
  3. 2010= $17 million
  4. 20011= net income so far is roughly -$ 79 million.

Total cash flow from operating activities

  1. 2008= $273.9 million
  2. 2009 =$173.6 million
  3. 2010 =$114.4 million
  4. 2011= it currently stands at $95 million

Key Ratios

• Price to sale 14.2

• Price to tangible book 0

• Price to cash flow 12.5

• Price to free cash flow 9.2

• 5 year sales growth N.A.

• Inventory turnover 0

• Asset turnover 0

• ROE -0.92%

• Return on assets 3.33%

• 200 day moving average 27.06

• Total debt 1.85B

• Book value 9.62

• Dividend yield 5 year Average 9.30%

• Dividend rate $ 2.82 %

• Dividend growth rate 3 year average 4.40%

• Dividend growth rate 5 year average 5.40%

• Consecutive dividend increases 10 years

• Paying dividends since 2001

• Total return last 3 years 51.18%

• Total return last 5 years 20.92%

Life Partners Holdings Inc. (NASDAQ:LPHI)

Industry: Finance Intermediaries & Services

It has a current ratio of 2.97 and a levered free cash flow rate of $6.6 million

Net income for the past three years

  1. 2009= -$25.5 million
  2. 2010 = $26.07 million
  3. 2011= $23.4 million

Total cash flow from operating activities

  1. 2009= $28.4 million
  2. 2010 =$31.2 million
  3. 2011 = -$30.7 million.

Key Ratios

• Price to sale -57.3

• Price to tangible book 0

• Price to cash flow 19.1

• Price to free cash flow 4.4

• 5 year sales growth 26.95

• Inventory turnover 0

• Asset turnover 0

• ROE 1.36%

• Return on assets 2.13%

• 200 day moving average 5.97

• Total debt 0

• Book value 2.25

• Dividend yield 5 year Average 6.60%

• Dividend rate $ 0.80 %

• Payout ratio 646.00%

• Dividend growth rate 3 year average 107.26%

• Dividend growth rate 5 year average 76.04%

• Consecutive dividend increases 0 years

• Paying dividends since 2002

• Total return last 3 years -73.90%

• Total return last 5 years 29.55%

LPHI has a very weak quarterly revenue growth rate and is a rather volatile stock; only individuals willing to take on extra risk should consider this play. If you get into this play consider selling covered calls as LPHI sports, a fairly high beta, and it will somewhat reduce your risk factor. The premium you receive will lower your per share cost.

FERRELLGAS PARTNERS L P (NYSE:FGP)

Industry: Oil & Gas Refining & Marketing

It has a levered free cash flow rate of 67.5 million and a current ratio of 0.95

Net income for the past three years

  1. 2009= -$52.7 million
  2. 2010 = $32.7 million
  3. 2011= -$43.6 million

Total cash flow from operating activities

  1. 2009= $201.7 million
  2. 2010 =$ 134.6 million
  3. 2011 = -$117.5 million

Key Ratios

• Price to sale 38.9

• Price to tangible book 0

• Price to cash flow 11.3

• Price to free cash flow 9.5

• 5 year sales growth N.A.

• Inventory turnover 0

• Asset turnover 0

• ROE -189.72%

• Return on assets 4.60%

• 200 day moving average 20.62

• Total debt 1.28B

• Book value 0.99

• Dividend yield 5 year Average 10.00%

• Dividend rate $ 2.00 %

• Payout ratio 555.00%

• Dividend growth rate 3 year average 0.00%

• Dividend growth rate 5 year average 0.00%

• Consecutive dividend increases 0 years

• Paying dividends since 1994

• Total return last 3 years 50.64%

• Total return last 5 years 30.77%

Conclusion

Our favourite stock on this play is NGLS. It has a quarterly revenue growth of 40%, a quarterly earnings growth of 160%, a ROE of 16.37%, a three-year dividend growth rate of 7.03%, a five dividend average of 8.80%, has consecutively increased its dividends for four years in a row, has total three-year return of 392% and has been paying dividends since 2007. It increased its dividend from $0.57 to $0.5825, and it has a levered free cash flow rate of $50.3 million.

As we have been advocating for the past few days, we feel that investors would be best served by waiting for a strong pullback before committing new funds to this market. Our prediction that the SP would trade to the 1300-1320 ranges has come to pass. We predicted this when the SPX was trading around 1200.

All charts sourced from dividata.com

Source: 7 Stocks That Sport Lofty Yields As High As 20%