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We have posted several key ratios on each of the five stocks covered in this article. We are going to explain some of these ratios below because we believe that they could prove to be useful in the selection process; these ratios could make the difference between getting into a winning or losing play.

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 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 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. Individuals searching for other ideas might find this article to be of interest 5 Plays With Stellar Payment Histories

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.

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. 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 should be in the 0.5-0.6 range.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows investors 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.

Price to sales ratio is calculated by dividing the company's share price by its revenue per share. Generally, the smaller the ratio (less than 1.0), the better the investment, since the investor is paying less for each unit of sales. However, there are exceptions as a company with a low price to sales ratio could be unprofitable. It is sometimes used to determine the relative valuation of a sector.

Inventory turnover is calculated by dividing sales by inventory. If a company generated $30 million in sales and had an average inventory of $6 million; the inventory turnover would be equal to 5. This value indicates that there are 5 inventory turnovers per year. This means that it takes roughly 2.4 months to sell the inventory. A low inventory turnover is a sign of inefficiency and vice versa.

Asset turnover is calculated by dividing revenues by assets. It measures a firm's effectiveness at using its assets in generating revenue. Higher numbers are generally better and vice versa. In general, companies with low profit margins have higher asset turnover rates than companies with high profit margin.

Quick Ratio is calculated by adding the cash and cash equivalents, marketable securities and accounts receivable and dividing the sum by current liabilities. It is a measure of a company's ability to use its quick assets (assets that can be sold off 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. Additional key metrics are addressed in this article 5 Dividend Champs With Yields As High As 17%

Exelon Corp. (EXC) is our favorite play on the list and we like it for the following reasons:

  1. Has five-year dividend average of 4.2%
  2. A five-year dividend growth rate of 5.87%
  3. Paying dividends since 1902
  4. Has a manageable payout ratio of 56%
  5. A ROE of 17%
  6. Has a good interest coverage ratio of 6.2
  7. A decent current ratio of 1.3

$100K invested in EXC for 10 years would have grown to $181,156.00

Key data investors should be aware of with regard to investing in MLPs and REITS:

  1. 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.
  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 the ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and to generally most investors.
  3. MLPs issue a Schedule K-1 to their investors. Unrelated business income (UBI) above $1,000 is taxable in an IRA. This information will appear in Box 20 in the schedule K-1. UBI is typically a very small number; usually well below $1,000 and in some cases negative. 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 units. 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

DOM

9.1%

77.86M

3.05

7.7M

-11.40%

0.57

8.76M

--

EXC

5.3%

26.24B

14.03

6.66B

0.10%

0.55

19.43B

4.05B

CODI

9.9%

704.68M

9.54

129.45M

6.30%

1.06

1.78B

73.81M

HR

5.6%

1.66B

16.5

159.80M

18.20%

1.07

289.04M

79.11M

FGP

12%

1.27B

34.08

196.78M

34.50%

0.55

2.56B

91.38M

Dominion Resources Black Warrior Trust (NYSE: DOM

Industry : Production & Extraction

Net income for the past three years

2008 = $25.65 million

2009 = $11.2 million

2010 = $9.19 million

Key Ratios

P/E Ratio = 10.1

P/E High - Last 5 Yrs = 14.3

P/E Low - Last 5 Yrs = 3.7

Price to Sales = 8.91

Price to Book = 5.29

Price to Tangible Book = 5.29

Price to Cash Flow = 10.1

Price to Free Cash Flow = -22.9

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0

Total Debt to Equity = 0

Interest Coverage = N.A.

Inventory Turnover = N.A.

Asset Turnover = 0.5

ROE = 48.39%

Return on Assets = 29.98%

200 day moving average = 9.03

Current Ratio = 0.09

Total debt = 0

Book value = 1.88

Qtrly Earnings Growth = -13%

Dividend yield 5 year average = 11.6%

Dividend rate = $ 0.94

Payout ratio = 102%

Dividend growth rate 3 year avg = -31.56%

Dividend growth rate 5 year avg = -24.63%

Consecutive dividend increases = 0 years

Paying dividends since = 1994

Total return last 3 years = -30.3%

Total return last 5 years = -27.58%

Warning

Net income has been dropping for 3 years in a row. Total return for the past 3 years is a negative (-30%). The 5 year and 3 year dividend growth rates are negative and quarterly earnings growth rate is negative at -13%. Only speculators should consider this play.

Exelon Corp.

Industry : Electric Utilities

Net income for the past three years

2008 = $2.74 billion

2009 = $2.71 billion

2010 = $2.57 billion

2011 = it stands at $1.9 billion and could top the $2.5 billion mark

Total cash flow from operating activities

2008 = $6.56 billion

2009 = $6.1 billion

2010 = $5.25 billion

Key Ratios

P/E Ratio = 10.6

P/E High - Last 5 Yrs = 22.3

P/E Low - Last 5 Yrs = 9.4

Price to Sales = 1.37

Price to Book = 1.84

Price to Tangible Book = 2.25

Price to Cash Flow = 5.5

Price to Free Cash Flow = -10.4

Quick Ratio = 0.7

Current Ratio = 1.3

LT Debt to Equity = 0.88

Total Debt to Equity = 0.99

Interest Coverage = 6.2

Inventory Turnover = 14.3

Asset Turnover = 0.4

ROE = 17.05%

Return on Assets = 5.32%

200 day moving average = 42.59

Current Ratio = 1.26

Total debt = 14.58B

Book value = 21.65

Qtrly Earnings Growth = -28.9%

Dividend yield 5 year average = 4.2%

Dividend rate = $ 2.10

Payout ratio = 56%

Dividend growth rate 3 year avg = 1.23%

Dividend growth rate 5 year avg = 5.87%

Paying dividends since = 1902

Total return last 3 years = -15.09%

Total return last 5 years = -18.36%

Notes

Dividends have been increasing steadily since 2000, though the quarterly earnings growth rate has turned negative (-28.9%).

Compass Diversified Holdings (NASDAQ: CODI

Industry : Business Services

Net income for the past three years

2008 = $78.3 million

2009 = $-26.27 million

2010 = $-48.76 million

2011 = it stands at $8 million and could potentially come in the $10 million-$15 million range

Total cash flow from operating activities

2008 = $40.55 million

2009 = $20.22 million

2010 = $44.85 million

2011 = it stands at $57 million and could top the $65 million mark

Key Ratios

P/E Ratio = 90.8

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 0.39

Price to Book = 1.53

Price to Tangible Book = -2.31

Price to Cash Flow = 11.7

Price to Free Cash Flow = -2.6

Quick Ratio = 1.4

Current Ratio = 2.2

LT Debt to Equity = 0.63

Total Debt to Equity = 0.68

Interest Coverage = 3.2

Inventory Turnover = 14

Asset Turnover = 1.6

ROE = 2.63%

Return on Assets = 4.49%

200 day moving average = 13.14

Current Ratio = 2.16

Total debt = 292.50M

Book value = 9.5

Qtrly Earnings Growth = N/A

Dividend yield 5 year average = 10%

Dividend rate = $ 1.44

Payout ratio = 875%

Dividend growth rate 3 year avg = 2.71%

Consecutive dividend increases = 1 years

Paying dividends since = 2006

Total return last 3 years = 72.8%

Total return last 5 years = 18.9%

Notes

Net income could turn positive for 2011, marking a good turnaround. A worrying development is that cash flow from operating activities has been unable to cover dividend payments for the past three years.

Healthcare Realty Trust, Inc. (NYSE: HR

Industry : REITs

Net income for the past three years

2008 = $41.7 million

2009 = $51.1 million

2010 = $8.2 million

2011 = it stands at $-3.1 million

Total cash flow from operating activities

2008 = $106.61 million

2009 = $103.22 million

2010 = $80.84 million

Key Ratios

P/E Ratio = N.A.

P/E High - Last 5 Yrs = 194.2

P/E Low - Last 5 Yrs = 13.9

Price to Sales = 5.75

Price to Book = 1.62

Price to Tangible Book = 1.62

Price to Cash Flow = -610

Price to Free Cash Flow = -4.5

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 1.32

Total Debt to Equity = 1.32

Interest Coverage = 0.9

Inventory Turnover = N.A.

Asset Turnover = 0.1

ROE = -0.36%

Return on Assets = 1.98%

200 day moving average = 17.97

Current Ratio = 1.48

Total debt = 1.35B

Book value = 13.14

Qtrly Earnings Growth = N/A

Dividend yield 5 year average = 10.8%

Dividend rate = $ 1.20

Payout ratio =

Dividend growth rate 3 year avg = -7.36%

Dividend growth rate 5 year avg = -21.32%

Consecutive dividend increases = 0 years

Paying dividends since = 1993

Total return last 3 years = 54.75%

Total return last 5 years = -20.09%

Warning

Net income dropped dramatically in 2010 and dividend saw a severe cut in 2007. Only investors willing to take on extra risks should consider this play.

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 0.9.

Net income for the past three years

2009 = $52.58 million

2010 = $32.71 million

2011 = $-43.65 million

Total cash flow from operating activities

2009 = $201.77 million

2010 = $134.63 million

2011 = $117.57 million

Key Ratios

P/E Ratio = N.A.

P/E High - Last 5 Yrs = N.A.

P/E Low - Last 5 Yrs = N.A.

Price to Sales = 0.5

Price to Book = 80.88

Price to Tangible Book = -2.91

Price to Cash Flow = 36.7

Price to Free Cash Flow = -19.2

Quick Ratio = 0.5

Current Ratio = 0.9

LT Debt to Equity = 68.13

Total Debt to Equity = 81.32

Interest Coverage = 0.5

Inventory Turnover = 12.9

Asset Turnover = 1.7

ROE = -189.72%

Return on Assets = 4.6%

200 day moving average = 20.22

Current Ratio = 0.95

Total debt = 1.28B

Book value = 0.99

Qtrly Earnings Growth = N/A

Dividend yield 5 year average = 10%

Dividend rate = $ 2.00

Dividend growth rate 5 year avg = 9.5%

Consecutive dividend increases = 0 years

Paying dividends since = 1994

Total return last 3 years = 48.72%

Total return last 5 years = 21.24%

Warning

Insiders purchased over 1.38 million shares in January 2012 at a price of $18 per share. This could indicate that they expect things to turn around. The full list of transactions can be accessed here. Cash flows from operating activities have not been enough to cover the dividend payments for the past two years.

Thought the stock has taken a beating, we would wait a bit longer before committing new money into this play. It is in the initial stages of putting in a bottom and could potentially test the 10 ranges before a sustainable bottom is in place.

All earnings vs. expectations graphs sourced from smartmoney.com and all dividend history charts sourced from dividata.com

Source: 5 Interesting Stocks Paying Dividends Over 11%

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 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.