Market volatility and economic uncertainty are driving more individuals into stocks that pay dividends. Investors who are new to the concept of dividend investing should take the time to understand the following ratios as they could prove to be very useful in spotting future champions.
Free cash flow yield is obtained by dividing free cash flow per share by the current price of each share. Generally lower ratios are associated with an unattractive investment and vice versa. Free cash flow takes into account capital expenditures and other ongoing costs associated with the day to day to functions of the business. In our view free cash flow yield is a better valuation metric then earnings yield because of the above factor
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. Investors looking for other ideas might find this article to be of interest 7 Candidates Sporting Yields As High As 12%.
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
Debt to Equity Ratio is found by dividing the company's total amount of longterm 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. There is no fixed ideal number as it depends on the industry the company is in. However, in general a ratio under 1 is acceptable and ideally it should be in the 0.50.6 ranges.
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.
Quick ratio or acidtest is obtained by adding cash and cash equivalents plus marketable securities and accounts receivable dividing them by current liabilities. It is a measure of a company's ability to use its quick assets (assets that can be sold of immediately at close to book value) to pay off its current liabilities immediately. A company with a quick ratio of less than 1 cannot pay back its current liabilities.
Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to
Our favorite play is Universal Health Realty Income; it has a quarterly revenue growth rate of 10%, a ROE of 11.0%, a five year dividend growth rate of 1.42%, a 3 year total return of 56.9%, a five year dividend average of 6.9%, and has consecutively increased its dividend for a whopping 20 years. It has a levered free cash flow rate of $16.1 million. Out of a possible 5 stars we would issue UHT a full five.
Enterprise Products Partners LP runs at a very close second. It has a ROE of 14.55%, a fiveyear dividend growth rate of 6.03%, a total return of 144% for the past three years, and has been paying dividends since1998. It has a levered free cash flow rate of $1.01 billion. Out of a possible five stars, we would assign EPD four. The dividend was raised from $0.6050 to $0.6125.
BCE Inc (NYSE:BCE) and Enterprise Products Partners LP (NYSE:EPD) sport yields of 5.20% and 5.10% respectively.
BCE has a levered free cash flow rate of $1.06 billion and current ratio 0.76.
Net income for the past three years
2008 = $770.84 million
2009 = $1.66 billion
2010 = $2.3 billion
Total cash flow from operating activities
2008 = $4.91 billion
2009 = $4.66 billion
2010 = $4.76 billion
Key ratios
 ROE = 16.7%
 Return on Assets = 6.63%
 200 day moving average = $39.17
 Current Ratio = 0.76
 Total debt = 14.84B
 Book value = 13.41
 Qtrly Earnings Growth = 40.3%
Enterprise Products Partners LP has enterprise value of $56.2 billion, a quarterly revenue growth of 40.40%, a ROE of 14.55%, a fiveyear dividend growth rate of 6.03%, a total return of 144% for the past three years, and has been paying dividends since1998. It has a levered free cash flow rate of $1.01 billion. Out of a possible five stars, we would assign EPD four. The dividend was raised from $0.6050 to $0.6125.
Key Ratios
 ROE 14.55%
 Return on assets 5.23%
 Total debt 15.4B
 200 day moving average $43.64
 Book value $13.14
 Dividend yield 5 year Average 6.5%
 Dividend rate $2.40
 Payout ratio 190%
New developments
Enterprise Products Partners LP and Genesis Energy LP have stated that they will build a crude oil pipeline in the Gulf of Mexico. These two companies have made transportation agreements with six crude oil producers. The pipeline is will be roughly 149 miles long and is expected to transport 115,000 barrels of oil a day. In the 50/50 joint venture, the pipeline is expected to be operational sometime in 2014.
Important facts investors should be aware in regards to investing in MLPs and REITS
 Payout ratios are not that important when it comes to MLPS/REITS as they are required by law to pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend/distribution 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.
 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.
 MLPs issue a Schedule K1 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. For more information, on this topic investors can visit the National Association of Publicly Traded Partnerships.
Stock 
Dividend Yield 
Market Cap 
Forward PE 
EBITDA 
Quarterly Revenue Growth 
Beta 
Revenue 
Operating Cash flow 
6.10% 
505.75M 
15.66 
23.47M 
10.20% 
0.64 
30.85M 
21.20M 

3.30% 
13.95B 
14.31 
1.79B 
26.90% 
1.12 
19.05B 
1.33B 

5.40% 
4.56B 
15.81 
1.04B 
20.50% 
0.52 
6.20B 
799.00M 

5.20% 
17.77B 
12.99 
3.63B 
27.00% 
0.46 
15.06B 
3.23B 

13.70% 
878.29M 
8.1 
196.10M 
10.10% 
1.46 
286.92M 
145.59M 
Universal Health Realty Income (NYSE: UHT)
Industry : REITs
The dividend was raised from 60.50 cents to 61 cents.
Net income for the past three years
2008 = $11.66 million
2009 = $18.58 million
2010 = $16.31 million
Total cash flow from operating activities
2008 = $21.85 million
2009 = $24.99 million
2010 = $23.05 million
Key Ratios
P/E Ratio = 33.1
P/E High  Last 5 Yrs = 40.1
P/E Low  Last 5 Yrs = 10.1
Price to Sales = 16.43
Price to Book = 3.78
Price to Tangible Book = 3.78
Price to Cash Flow = 33.1
Price to Free Cash Flow = 33.8
Quick Ratio = N.A.
Current Ratio = N.A.
LT Debt to Equity = 0.12
Total Debt to Equity = 0.79
Interest Coverage = 9.4
Inventory Turnover = N.A.
Asset Turnover = 0.1
ROE = 11.01%
Return on Assets = 4.55%
200 day moving average = 388.01K
Current Ratio = 1.41
Total debt = 105.15M
Book value = 10.58
Qtrly Earnings Growth = 1.2%
Dividend yield 5 year average = 6.9%
Dividend rate = $ 2.44
Payout ratio = 200%
Dividend growth rate 3 year avg = 1.2%
Dividend growth rate 5 year avg = 1.42%
Consecutive dividend increases = 20 years
Paying dividends since = 1990
Total return last 3 years = 56.91%
Total return last 3 years = 32.66%
Nucor Corp. (NYSE: NUE)
Industry: NonPrecious Metals
The dividend was raised from 36.25 cents to 36.50 cents.
Net income for the past three years
2008 = $1.84 billion
2009 = $293.62 million
2010 = $134.1 million
Total cash flow from operating activities
2008 = $2.5 billion
2009 = $1.18 billion
2010 = $873.41 million
Key Ratios
P/E Ratio = 22.2
P/E High  Last 5 Yrs = N.A.
P/E Low  Last 5 Yrs = N.A.
Price to Sales = 0.73
Price to Book = 1.86
Price to Tangible Book = 2.87
Price to Cash Flow = 11.4
Price to Free Cash Flow = 53.4
Quick Ratio = 1.8
Current Ratio = 2.9
LT Debt to Equity = 0.53
Total Debt to Equity = 0.57
Interest Coverage = 6.5
Inventory Turnover = 8.7
Asset Turnover = 1.4
ROE = 9.42%
Return on Assets = 5.34%
200 day moving average = 37.23
Current Ratio = 2.92
Total debt = 4.29B
Book value = 23.56
Qtrly Earnings Growth = 672.6%
Dividend yield 5 year average = 3.7%
Dividend rate = $ 1.46
Payout ratio = 74%
Dividend growth rate 3 year avg = 7.73%
Dividend growth rate 5 year avg = 6.28%
Consecutive dividend increases = 39 years
Paying dividends since = 1973
Total return last 3 years = 21.82%
Total return last 3 years = 16.37%
Pepco Holdings Inc. (NYSE: POM)
Industry : Electric Utilities
Net income for the past three years
2008 = $300 million
2009 = $235 million
2010 = $32 million
Total cash flow from operating activities
2008 = $413 million
2009 = $606 million
2010 = $813 million
Key Ratios
P/E Ratio = 16.9
P/E High  Last 5 Yrs = 141.4
P/E Low  Last 5 Yrs = 9.5
Price to Sales = 0.74
Price to Book = 1.05
Price to Tangible Book = 1.55
Price to Cash Flow = 6.5
Price to Free Cash Flow = 3.5
Quick Ratio = 0.6
Current Ratio = 1
LT Debt to Equity = 0.96
Total Debt to Equity = 1.12
Interest Coverage = 2.4
Inventory Turnover = 34
Asset Turnover = 0.4
ROE = 5.86%
Return on Assets = 2.66%
200 day moving average = 19.26
Current Ratio = 0.96
Total debt = 4.86B
Book value = 19.2
Qtrly Earnings Growth = 370.6%
Dividend yield 5 year average = 5.6%
Dividend rate = $ 1.08
Payout ratio = 98%
Dividend growth rate 3 year avg = ERROR
Dividend growth rate 5 year avg = 0.77%
Consecutive dividend increases = 0 years
Paying dividends since = 1904
Total return last 3 years = 33.47%
Total return last 3 years = N/A
FirstEnergy Corp. (NYSE: FE)
Industry : Electric Utilities
Net income for the past three years
2008 = $1.35 billion
2009 = $1.01 billion
2010 = $784 million
Total cash flow from operating activities
2008 = $2.22 billion
2009 = $2.47 billion
2010 = $3.08 billion
Key Ratios
P/E Ratio = 17.5
P/E High  Last 5 Yrs = 19.2
P/E Low  Last 5 Yrs = 9.4
Price to Sales = 1.13
Price to Book = 1.35
Price to Tangible Book = 3.1
Price to Cash Flow = 14.3
Price to Free Cash Flow = 20.4
Quick Ratio = 0.4
Current Ratio = 0.7
LT Debt to Equity = 1.21
Total Debt to Equity = 1.35
Interest Coverage = 2.4
Inventory Turnover = 15.9
Asset Turnover = 0.4
ROE = 8.34%
Return on Assets = 3.78%
200 day moving average = 43.79
Current Ratio = 0.68
Total debt = 17.66B
Book value = 31.19
Qtrly Earnings Growth = 185.5%
Dividend yield 5 year average = 4.6%
Dividend rate = $ 2.20
Payout ratio = 91%
Dividend growth rate 3 year avg = ERROR
Dividend growth rate 5 year avg = 4.22%
Consecutive dividend increases = 0 years
Paying dividends since = 1998
Total return last 3 years = 0.59%
Total return last 3 years = 8.39%
Ship Finance International Ltd (NYSE: SFL)
Industry : Equipment & Services
Net income for the past three years
2008 = $181.62 million
2009 = $192.6 million
2010 = $165.72 million
Total cash flow from operating activities
2008 = $211.39 million
2009 = $125.53 million
2010 = $153.78 million
Key Ratios
P/E Ratio = 8.9
P/E High  Last 5 Yrs = 13.8
P/E Low  Last 5 Yrs = 1.5
Price to Sales = 4.09
Price to Book = 1.07
Price to Tangible Book = 1.07
Price to Cash Flow = 6
Price to Free Cash Flow = 2.5
Quick Ratio = 0.4
Current Ratio = 1
LT Debt to Equity = 2.2
Total Debt to Equity = 2.41
Interest Coverage = 2.3
Inventory Turnover = N.A.
Asset Turnover = 0.1
ROE = 16.14%
Return on Assets = 3.21%
200 day moving average = 4.18M
Current Ratio = 1
Total debt = 2.03B
Book value = 10.61
Qtrly Earnings Growth = 20.7%
Dividend yield 5 year average = 11.4%
Dividend rate = $ 1.55
Payout ratio = 93%
Dividend growth rate 3 year avg = 6.75%
Dividend growth rate 5 year avg = 1.77%
Consecutive dividend increases = 0 years
Paying dividends since = 2004
Total return last 3 years = 22.88%
Total return last 3 years = 21.09%
All charts were sourced from dividata.com
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.