10 Low Debt Dividend Stocks With Strong Sources Of Profitability

by: Kapitall

Looking for dividends you can rely on? For ideas on where to look, we ran a screen you might find interesting.

We screened for stocks paying dividend yields above 2% and sustainable payout ratios below 50% for those with low levels of company debt. We then ran DuPont analysis on these companies to find those with strong sources of profitability.

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

= (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 companies have strong profitability? Use this list as a starting point for your own analysis.

1. Bob Evans Farms Inc. (NASDAQ:BOBE): Operates full-service restaurants under the Bob Evans and Mimi's Cafe brand names in the United States. Dividend yield at 2.72%, payout ratio at 39.77%. Total debt/equity at 0.21. MRQ net profit margin at 3.13% vs. 1.87% y/y. MRQ sales/assets at 0.384 vs. 0.384 y/y. MRQ assets/equity at 1.603 vs. 1.702 y/y.

2. CA Technologies (NASDAQ:CA): Designs, develops, markets, delivers, licenses, and supports information technology management software products that operate on a range of hardware platforms and operating systems. Dividend yield at 3.69%, payout ratio at 10.64%. Total debt/equity at 0.23. MRQ net profit margin at 20.82% vs. 17.48% y/y. MRQ sales/assets at 0.107 vs. 0.096 y/y. MRQ assets/equity at 2.058 vs. 2.176 y/y.

3. Cal-Maine Foods, Inc. (NASDAQ:CALM): Engages in the production, grading, packaging, marketing, and distribution of shell eggs primarily in the southeastern, southwestern, mid-western, and mid-Atlantic regions of the United States. Dividend yield at 2.45%, payout ratio at 33.38%. Total debt/equity at 0.19. MRQ net profit margin at 8.01% vs. 6.48% y/y. MRQ sales/assets at 0.422 vs. 0.368 y/y. MRQ assets/equity at 1.576 vs. 1.625 y/y.

4. Foot Locker, Inc. (NYSE:FL): Operates as a retailer of athletic footwear and apparel. Dividend yield at 2.47%, payout ratio at 38.87%. Total debt/equity at 0.06. MRQ net profit margin at 4.73% vs. 4.06% y/y. MRQ sales/assets at 0.458 vs. 0.44 y/y. MRQ assets/equity at 1.455 vs. 1.472 y/y.

5. Quaker Chemical Corporation (NYSE:KWR): Develops, produces, and markets formulated chemical specialty products for various heavy industrial and manufacturing applications. Dividend yield at 2.10%, payout ratio at 42.12%. Total debt/equity at 0.18. MRQ net profit margin at 7.33% vs. 4.61% y/y. MRQ sales/assets at 0.365 vs. 0.321 y/y. MRQ assets/equity at 1.987 vs. 2.389 y/y.

6. National Healthcare Corp. (NYSEMKT:NHC): Operates and manages long-term health care centers, and associated assisted living and independent living centers in the United States. Dividend yield at 2.56%, payout ratio at 28.41%. Total debt/equity at 0.02. MRQ net profit margin at 8.73% vs. 8.45% y/y. MRQ sales/assets at 0.233 vs. 0.22 y/y. MRQ assets/equity at 1.413 vs. 1.473 y/y.

7. Staples, Inc. (NASDAQ:SPLS): Operates as an office products company. Dividend yield at 2.72%, payout ratio at 28.03%. Total debt/equity at 0.28. MRQ net profit margin at 4.97% vs. 4.42% y/y. MRQ sales/assets at 0.483 vs. 0.471 y/y. MRQ assets/equity at 1.898 vs. 2.049 y/y.

8. Steris Corp. (NYSE:STE): Develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and surgical support products and services to healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide. Dividend yield at 2.20%, payout ratio at 30.67%. Total debt/equity at 0.27. MRQ net profit margin at 9.47% vs. 6.63% y/y. MRQ sales/assets at 0.258 vs. 0.243 y/y. MRQ assets/equity at 1.764 vs. 1.802 y/y.

9. Symetra Financial Corporation (NYSE:SYA): Operates as a financial services company in the life insurance industry in the United States. Dividend yield at 2.43%, payout ratio at 13.13%. Total debt/equity at 0.18. MRQ net profit margin at 13.21% vs. 12.56% y/y. MRQ sales/assets at 0.02 vs. 0.019 y/y. MRQ assets/equity at 9.002 vs. 10.769 y/y.

10. Williams-Sonoma Inc. (NYSE:WSM): Operates as a specialty retailer of home products. Dividend yield at 2.37%, payout ratio at 30.18%. Total debt/equity at 0.01. MRQ net profit margin at 5.01% vs. 4.48% y/y. MRQ sales/assets at 0.423 vs. 0.401 y/y. MRQ assets/equity at 1.644 vs. 1.697 y/y.

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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