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There is a lot more to profitability than whether a company's bottom line is increasing. Profits can come from several sources, with some better than others. To get a deeper look into a company's profit trends, we performed DuPont analysis on stocks of the S&P 500 paying dividend yields above 1%.

DuPont analyzes return on equity (ROE, or net income/equity) profitability by breaking ROE up into three components:

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

We therefore focus on companies with the following positive 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 with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial leverage.

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 stocks pay reliable dividends? Use this list as a starting point for your own analysis.

List sorted by increase in ROE.

1. CONSOL Energy Inc. (NYSE:CNX): Engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. Market cap of $7.49B. Dividend yield at 1.51%, payout ratio at 16.73%. MRQ Net Profit Margin increased to 11.0% from 5.59% year-over-year, Sales/Assets increased to 0.13 from 0.12, while Assets/Equity decreased to 3.55 from 3.77. It's been a rough couple of days for the stock, losing 9.56% over the last week.

2. Motorola Solutions, Inc. (NYSE:MSI): Provides business and mission critical communication products and services for enterprise and government customers worldwide. Market cap of $15.49B. Dividend yield at 1.85%, payout ratio at 9.30%. MRQ Net Profit Margin increased to 6.08% from 5.77% year-over-year, Sales/Assets increased to 0.14 from 0.07, while Assets/Equity decreased to 2.42 from 2.48. The stock has gained 29.78% over the last year.

3. Chevron Corporation (NYSE:CVX): Engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. Market cap of $212.87B. Dividend yield at 3.03%, payout ratio at 22.20%. MRQ Net Profit Margin increased to 12.15% from 7.58% year-over-year, Sales/Assets increased to 0.32 from 0.28, while Assets/Equity decreased to 1.69 from 1.73. The stock has gained 18.93% over the last year.

4. Harley-Davidson, Inc. (NYSE:HOG): Produces and sells heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. Market cap of $9.75B. Dividend yield at 1.19%, payout ratio at 23.44%. MRQ Net Profit Margin increased to 13.14% from 7.05% year-over-year, Sales/Assets increased to 0.14 from 0.13, while Assets/Equity decreased to 3.73 from 4.59. This is a risky stock that is significantly more volatile than the overall market (beta = 2.17). The stock has had a good month, gaining 15.37%.

5. NYSE Euronext, Inc. (NYSE:NYX): Operates securities exchanges. Market cap of $7.19B. Dividend yield at 4.37%, payout ratio at 48.77%. MRQ Net Profit Margin increased to 15.90% from 12.19% year-over-year, Sales/Assets increased to 0.10 from 0.08, while Assets/Equity decreased to 1.91 from 2.0. The stock has lost 11.48% over the last year.
6. Tiffany & Co. (NYSE:TIF): Engages in the design, manufacture, and retail of fine jewelry worldwide. Market cap of $7.86B. Dividend yield at 1.87%, payout ratio at 31.16%. MRQ Net Profit Margin increased to 10.91% from 8.08% year-over-year, Sales/Assets increased to 0.21 from 0.19, while Assets/Equity decreased to 1.69 from 1.76. The stock has gained 8.94% over the last year.

7. The Dow Chemical Company (NYSE:DOW): Manufactures and supplies products used as raw materials in the production of customer products and services worldwide. Market cap of $39.46B. Dividend yield at 2.99%, payout ratio at 32.23%. MRQ Net Profit Margin increased to 5.96% from 4.64% year-over-year, Sales/Assets increased to 0.23 from 0.19, while Assets/Equity decreased to 2.77 from 3.01. This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has had a good month, gaining 30.84%.

8. Snap-on Inc. (NYSE:SNA): Manufactures and markets tools, diagnostics, equipment, software, and service solutions for professional users in the United States, the United Kingdom, Canada, Germany, Japan, France, Australia, Spain, the Netherlands, Italy, China, and Sweden. Market cap of $3.17B. Dividend yield at 2.50%, payout ratio at 22.65%. MRQ Net Profit Margin increased to 9.72% from 7.12% year-over-year, Sales/Assets increased to 0.1921 from 0.1889, while Assets/Equity decreased to 2.33 from 2.50. The stock has had a good month, gaining 11%.

9. Cummins Inc. (NYSE:CMI): Designs, manufactures, distributes, and services diesel and natural gas engines, electric power generation systems, and engine-related component products worldwide. Market cap of $20.21B. Dividend yield at 1.53%, payout ratio at 13.84%. MRQ Net Profit Margin increased to 9.77% from 8.32% year-over-year, Sales/Assets increased to 0.41 from 0.34, while Assets/Equity decreased to 2.18 from 2.35. The stock has had a couple of great days, gaining 5.59% over the last week.

10. Rockwell Automation Inc. (NYSE:ROK): Provides industrial automation power, control, and information solutions. Market cap of $11.53B. Dividend yield at 2.10%, payout ratio at 30.37%. MRQ Net Profit Margin increased to 12.20% from 9.67% year-over-year, Sales/Assets increased to 0.31 from 0.29, while Assets/Equity decreased to 3.02 from 3.25. The stock has had a good month, gaining 12.35%.

11. Honeywell International Inc. (NYSE:HON): Operates as a diversified technology and manufacturing company worldwide. Market cap of $44.38B. Dividend yield at 2.60%, payout ratio at 40.04%. MRQ Net Profit Margin increased to 9.27% from 7.35% year-over-year, Sales/Assets increased to 0.24 from 0.21, while Assets/Equity decreased to 3.38 from 3.69. The stock has gained 7.86% over the last year.

12. Eaton Corporation (NYSE:ETN): Operates as a power management company worldwide. Market cap of $16.17B. Dividend yield at 2.81%, payout ratio at 35.17%. MRQ Net Profit Margin increased to 8.85% from 7.50% year-over-year, Sales/Assets increased to 0.23 from 0.21, while Assets/Equity decreased to 2.28 from 2.36. The stock has had a good month, gaining 15.85%.

13. Entergy Corporation (NYSE:ETR): Operates as an integrated energy company in the United States. Market cap of $12.32B. Dividend yield at 4.75%, payout ratio at 41.72%. MRQ Net Profit Margin increased to 18.64% from 14.94% year-over-year, Sales/Assets increased to 0.0867 from 0.0862, while Assets/Equity decreased to 4.22 from 4.28. The stock has gained 0.33% over the last year.

14. Torchmark Corp. (NYSE:TMK): Provides individual life and supplemental health insurance products, and annuities to middle income households. Market cap of $4.62B. Dividend yield at 1.06%, payout ratio at 9.23%. MRQ Net Profit Margin increased to 16.37% from 13.65% year-over-year, Sales/Assets increased to 0.0493 from 0.0474, while Assets/Equity decreased to 4.06 from 4.15. The stock has gained 12.54% over the last year.

15. Total System Services, Inc. (NYSE:TSS): Provides electronic payment processing and other services to card-issuing and merchant acquiring institutions. Market cap of $4.19B. Dividend yield at 1.92%, payout ratio at 26.08%. MRQ Net Profit Margin increased to 12.65% from 10.56% year-over-year, Sales/Assets increased to 0.25 from 0.23, while Assets/Equity decreased to 1.42 from 1.55. The stock has gained 23.96% over the last year.

16. Xerox Corp. (NYSE:XRX): Engages in the development, manufacture, marketing, service, and finance of document equipment, software, solutions, and services worldwide. Market cap of $12.15B. Dividend yield at 1.94%, payout ratio at 22.77%. MRQ Net Profit Margin increased to 5.73% from 4.61% year-over-year, Sales/Assets increased to 0.1828 from 0.1760, while Assets/Equity decreased to 2.33 from 2.52. Might be undervalued at current levels, with a PEG ratio at 0.72, and P/FCF ratio at 10.24. The stock has had a couple of great days, gaining 7.75% over the last week.

17. Parker Hannifin Corporation (NYSE:PH): Manufactures fluid power systems, electromechanical controls, and related components. Market cap of $12.32B. Dividend yield at 1.82%, payout ratio at 19.58%. MRQ Net Profit Margin increased to 9.18% from 8.74% year-over-year, Sales/Assets increased to 0.31 from 0.26, while Assets/Equity decreased to 2.06 from 2.19. The stock has had a good month, gaining 10.36%.

18. Northrop Grumman Corporation (NYSE:NOC): Provides products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors. Market cap of $16.04B. Dividend yield at 3.26%, payout ratio at 30.93%. MRQ Net Profit Margin increased to 7.86% from 7.03% year-over-year, Sales/Assets increased to 0.26 from 0.23, while Assets/Equity decreased to 2.10 from 2.29. The stock has had a good month, gaining 11.29%.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 18 S&P 500 Dividend Stocks With Strong Sources Of Profitability