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Investors should familiarize themselves with the following ratios as they could prove to be extremely useful and helpful in the selection process. Understanding what these ratios mean could make the difference between spotting a winner or a loser.

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.

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

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

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 it should be in the 0.5-0.6 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 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.

Price to cash flow ratio is obtained by dividing the share price by cash flow per share. It is a measure of the market's expectations of a company's future financial health. The effects of depreciation and other non cash factors are removed, and this makes it easier for investors to assess foreign companies in the same industry. This ratio also provides a measure of relative value like the price to earning's ratio.

Price to free cash flow is obtained by dividing the share price by free cash flow per share. Higher ratios are associated with more expensive companies and vice versa; lower ratios are generally more attractive. If a company generated 400 million in cash flow and then spent 100 million on capital expenditure, then its free flow is $300 million. If the share price is 100 and the free cash flow per share are $5, then company trades at 20 times-free cash flow. This ratio is also useful because it can be used as a comparison to the average within the industry; this gives you an idea of how the company you are interested in holds up to the other companies within the industry.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of 1 year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. Additional key metrics are addressed in this article The Highest Paying REITs With Yields As High As 13%

There are many good long term plays on this list but we chose for SCANA Corp (NYSE:SCG) for the following reasons.

It has a five year dividend average of 4.8%

A decent payout ratio of 65%

Consecutive dividends for 11 years

Paying dividends since 1946

Total 3 year return 46.04%

Net income has been increasing for the past 3 years

Total cash flows from operating activities have also been increasing for the past 3 years and are on course for the 4th year.

100K invested for 10 years would have grown roughly to 222K.

Stock

Dividend Yield (%)

Market Cap

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

TEG

5.10

4.16B

15.03

732.40M

-5.90%

0.84

4.86B

583.00M

UIL

4.90

1.79B

16.15

352.33M

36.00%

0.68

1.53B

239.02M

SCG

4.20

5.93B

14.43

1.20B

0.40%

0.54

4.52B

841.00M

AEP

4.80

18.98B

11.91

4.81B

0.30%

0.49

15.11B

4.30B

CNP

4.30

8.05B

16.01

2.20B

-1.40%

0.61

8.40B

1.85B

Integrys Energy Group Inc (NYSE:TEG)

Industry : Electric Utilities

Levered Free Cash Flow: 20.90M

Net income for the past three years

2008 = $129.5 million

2009 = $-67.5 million

2010 = $223.7 million

2011= It stands at $191 and could top the $238 million mark.

Total cash flow from operating activities

2008 = $-250 million

2009 = $1.61 billion

2010 = $725.2 million

2011= It stands at $634 million and could come in as high as $740 million.

Key Ratios

P/E Ratio = 16.1

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

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

Price to Sales = 0.86

Price to Book = 1.38

Price to Tangible Book = 1.77

Price to Cash Flow = 8.1

Price to Free Cash Flow = 13.2

Quick Ratio = 0.5

Current Ratio = 1.3

LT Debt to Equity = 0.69

Total Debt to Equity = 0.77

Interest Coverage = 4.2

Inventory Turnover = 12.8

Asset Turnover = 0.5

ROE = 8.81%

Return on Assets = 3.19%

200 day moving average = 50.53

Current Ratio = 1.32

Total debt = 2.32B

Book value = 38.08

Qtrly Earnings Growth = 80.9%

Dividend yield 5 year average = 5.7%

Dividend rate = $ 2.72

Payout ratio = 82%

Dividend growth rate 3 year avg = 0.5%

Dividend growth rate 5 year avg = 5%

Consecutive dividend increases = 6 years

Paying dividends since = 1994

Total return last 3 years = 39.68%

Total return last 5 years = 18.8%

Notes

Net income and total cash from operating activities has been trending upwards for the past few years. It has a strong quarterly revenue growth rate of 80%, though quarterly revenue growth is weak at -4%. It has a decent interest coverage ratio of 4.2. After taking a massive hit in 2007 dividends payments have rebounded and recovered all the lost ground and then some.

UIL Holding Corp (NYSE:UIL)

Industry : Electric Utilities

Levered Free Cash Flow: -218.36M

Net income for the past three years

2008 = $48.15 million

2009 = $54.32 million

2010 = $54.86 million

2011= It stands at 78$ million and could top the $90 million mark.

Total cash flow from operating activities

2008 = $142.31 million

2009 = $172.11 million

2010 = $208.1 million

2011= it stands at $186 and could top the $226 million mark.

Key Ratios

P/E Ratio = 20.8

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

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

Price to Sales = 1.17

Price to Book = 1.63

Price to Tangible Book = 2.26

Price to Cash Flow = 7.7

Price to Free Cash Flow = -1.8

Quick Ratio = 0.5

Current Ratio = 1.1

LT Debt to Equity = 1.42

Total Debt to Equity = 1.56

Interest Coverage = 2.6

Inventory Turnover = 17.5

Asset Turnover = 0.4

ROE = 8.16%

Return on Assets = 3.71%

200 day moving average = 33.48

Current Ratio = 1.11

Total debt = 1.70B

Book value = 21.59

Qtrly Earnings Growth = -28.3%

Dividend yield 5 year average = 5.7%

Dividend rate = $ 1.73

Payout ratio = 102%

Dividend growth rate 3 year avg = 0%

Dividend growth rate 5 year avg = 0%

Consecutive dividend increases = 0 years

Paying dividends since = 1900

Total return last 3 years = 45.41%

Total return last 5 years = 12.85%

Notes

Net income and total cash flow from operating activities has been trending up for the three years. Dividends have remained flat for the past 10 years and it also sports a negative quarterly earning's growth rate. The payout ratio is also above 100%. On the positive side, it does sport a decent quarterly revenue growth rate of 36%.

SCANA Corp

Industry : Electric Utilities

Levered Free Cash Flow: -238.68M

Net income for the past three years

2008 = $346 million

2009 = $357 million

2010 = $376 million

2011= it stands at $246 and could come in as high as $416 million.

Total cash flow from operating activities

2008 = $454 million

2009 = $679 million

2010 = $811 million

2011= It stands at $1 million and could come in as low as $-120 million.

Key Ratios

P/E Ratio = 15.3

P/E High - Last 5 Yrs = 16.6

P/E Low - Last 5 Yrs = 9.1

Price to Sales = 1.31

Price to Book = 1.54

Price to Tangible Book = 1.64

Price to Cash Flow = 7.7

Price to Free Cash Flow = -16.7

Quick Ratio = 0.4

Current Ratio = 0.8

LT Debt to Equity = 1.14

Total Debt to Equity = 1.37

Interest Coverage = 2.9

Inventory Turnover = 7.5

Asset Turnover = 0.4

ROE = 10.35%

Return on Assets = 3.93%

200 day moving average = 41.63

Current Ratio = 0.84

Total debt = 5.41B

Book value = 29.68

Qtrly Earnings Growth = 4%

Dividend yield 5 year average = 4.8%

Dividend rate = $ 1.94

Payout ratio = 65%

Dividend growth rate 3 year avg = 1.78%

Dividend growth rate 5 year avg = 3.23%

Consecutive dividend increases = 11 years

Paying dividends since = 1946

Total return last 3 years = 46.04%

Total return last 5 years = 30.36%

Notes

While net income has generally been trending upwards for the past three years, total cash flow from operating activities is set to take a big hit in 2011 and come end up being negative for the full year. On the positive side, it has increased dividends for 11 years in a row, has a five year dividend average of 4.8%, a decent payout ratio of 65%, and has been paying dividends since 1946.

American Electric Power Company (NYSE:AEP)

Industry: Electric Utilities

Levered Free Cash Flow: 397.12M

Net income for the past three years

2008 = $1.38 billion

2009 = $1.36 billion

2010 = $1.22 billion

2011 = it stands at $1.63 billion and could top the 2.5 billion mark.

Total cash flow from operating activities

2008 = $2.58 billion

2009 = $2.48 billion

2010 = $2.67 billion

2011= It stands at $3.3 billion and could top the $4 billion mark.

Key Ratios

P/E Ratio = 10.5

P/E High - Last 5 Yrs = 17.5

P/E Low - Last 5 Yrs = 7.5

Price to Sales = 1.26

Price to Book = 1.3

Price to Tangible Book = 1.3

Price to Cash Flow = 5.4

Price to Free Cash Flow = 6.2

Quick Ratio = 0.4

Current Ratio = 0.8

LT Debt to Equity = 1.04

Total Debt to Equity = 1.21

Interest Coverage = 3

Inventory Turnover = 7.4

Asset Turnover = 0.3

ROE = 10.83%

Return on Assets = 3.73%

200 day moving average = 38.73

Current Ratio = 0.77

Total debt = 18.17B

Book value = 30.34

Qtrly Earnings Growth = 10.2%

Dividend yield 5 year average = 4.7%

Dividend rate = $ 1.88

Payout ratio = 49%

Dividend growth rate 3 year avg = 4.33%

Dividend growth rate 5 year avg = 3.5%

Consecutive dividend increases = 3 years

Paying dividends since = 1909

Total return last 3 years = 34.17%

Total return last 5 years = 5.54%

Notes

Net income and total cash flow from operating activities look set to explode upwards for 2011. It has a stellar dividend history as it has been paying dividends since 1909. Dividend was increased from 46 cents in Aug to 47 cents in Nov 2011.

CenterPoint Energy, Inc (NYSE:CNP)

Industry : Electric Utilities

Levered Free Cash Flow: 57.12M

Net income for the past three years

2008 = $447 million

2009 = $372 million

2010 = $442 million

2011= It stands at $1.24 billion and could top the $1.8 billion mark.

Total cash flow from operating activities

2008 = $851 million

2009 = $1.85 billion

2010 = $1.39 billion

2011= It stands at $1.4 billion and could top the $1.7 billion mark.

Key Ratios

P/E Ratio = 5.9

P/E High - Last 5 Yrs = 17.3

P/E Low - Last 5 Yrs = 6.5

Price to Sales = 0.96

Price to Book = 1.91

Price to Tangible Book = 3.2

Price to Cash Flow = 3.6

Price to Free Cash Flow = 79.7

Quick Ratio = 0.4

Current Ratio = 0.9

LT Debt to Equity = 2.02

Total Debt to Equity = 2.19

Interest Coverage = 4

Inventory Turnover = 14.2

Asset Turnover = 0.4

ROE = 21.18%

Return on Assets = 4.09%

200 day moving average = 19.54

Current Ratio = 0.86

Total debt = 9.06B

Book value = 9.88

Qtrly Earnings Growth = 691.1%

Dividend yield 5 year average = 4.8%

Dividend rate = $ 0.81

Payout ratio = 25%

Dividend growth rate 3 year avg = 2.67%

Dividend growth rate 5 year avg = 6.22%

Consecutive dividend increases = 6 years

Paying dividends since = 1922

Total return last 3 years = 47.55%

Total return last 5 years = 25.48%

Notes

Strong quarterly earnings growth rate of 691%, low payout ratio of 25% , a decent interest coverage ratio of 4 and a 5 year dividend average of 4.8%. It has also been paying dividends since 1922.

Conclusion

The markets have had a very strong run over the past few months. Long term players know from experience that the best time to buy is when there is fear in the air. As the markets are extremely overbought in the short and intermediate time frames, long-term investors should be patient wait for a strong pull back before committing large sums of money to this market.

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. 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.

All charts sourced from dividata.com

Source: 5 Super Stocks With Stellar Dividend Histories