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We have posted several key ratios on each of the five stocks covered in this article. Investors would be better off familiarizing themselves with the some of these ratios, as they could prove to be useful 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.

Long-term debt-to-equity ratio is the total long-term debt divided by the total equity. The amount of long-term debt a company carries on its balances sheet is very important, because it indicates the amount of money a company owes that it doesn't expect to pay off in the next year. A balance sheet that illustrates that long term debt has been decreasing for a few years is a sign that the company is doing well. When debt levels fall, and cash levels increase, the balance sheet is said to be improving and vice versa. If a company has too much debt on its books, it could end up being overwhelmed with interest payments and risk having too little working capital, which could, in the worst case scenario, lead to bankruptcy.

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 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. If the payout ratio continues to increase, the situation warrants close monitoring, since this cannot last forever; if your tolerance for risk is 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 Interesting Communication Plays

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 turn over 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, it should be in the 0.5-0.6 ranges.

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 then companies with high profit margins.

ROE is obtained by dividing the net income by share holder's equity. It measures how much profit a company generates with the money shareholders have invested in it.

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

Quick ratio or acid -test is obtained by adding cash and cash equivalents plus marketable securities and accounts receivable and 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. Additional key metrics are addressed in this article 5 Interesting Stocks With Superb Yields

Our favorite play is Western Gas Partners LP (NYSE:WES), and we chose it over the rest, even though it has a relatively short dividend history, because its total rate of return in 4 years was higher than the 10 year total return of any other play on the list.

Western Gas Partners LP is our play of choice for the following reasons.

  1. A very strong 3 year dividend growth rate of 31%.
  2. A strong quarterly revenue growth rate of 42%.
  3. As an MLP, it would be normal for it to have a payout ratio in excess of 100%, but it only sports a payout ratio of 89%.
  4. A good quarterly earnings growth rate of 20.1%.
  5. It has consecutively increased dividends from day 1.
  6. A great quick and current ratio of3.4 and 3.5 respectively.
  7. A decent interest coverage ratio of 6.1.
  8. A very good LT debt to equity ratio of .44.

Important facts investors should be aware in regards to investing in MLPs

Payout ratios are not that important when it comes to MLPS, which generally 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 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 declared per unit.

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 to most investors.

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 Box 20 in the schedule K-1. UBI is typically a very small number usually well below $1000, 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

(NYSE:CVX)

3.00

214.5B

8.16

51.10B

13.30%

0.78

247.00B

40.2B

(NYSE:SNH)

6.90

3.57B

11.49

336.95M

39.90%

1.06

409.07M

225.86M

(NYSE:HPT)

7.10

3.13B

7.79

576.56M

13.30%

1.39

1.18B

350.85M

(WES)

3.90

4.07B

22.7

256.27M

42.90%

0.49

610.86M

262.10M

(NASDAQ:VOD)

3.40

142.10B

10.25

23.11B

4.10%

0.76

73.43B

18.33B

Chevron Corporation (CVX)

Industry: Refining & Marketing

Free cash flow= $40.2 billion

Net income for the past three years

2008 = $23.94 billion

2009 = $10.49 billion

2010 = $19.03 billion

2011= it stands at $21 billion and could top the $30 billion mark.

Total cash flow from operating activities

2008 = $29.64 billion

2009 = $19.38 billion

2010 = $31.36 billion

2011= It stands at $32 billion and could top the $42 billion mark

Key Ratios

P/E Ratio = 7.8

P/E High - Last 5 Yrs = 15.2

P/E Low - Last 5 Yrs = 4.8

Price to Sales = 0.85

Price to Book = 1.73

Price to Tangible Book = 1.8

Price to Cash Flow = 5.2

Price to Free Cash Flow = 32.1

Quick Ratio = 1.3

Current Ratio = 1.6

LT Debt to Equity = 0.08

Total Debt to Equity = 0.08

Interest Coverage = 1951

Inventory Turnover = 27.2

Asset Turnover = 1.3

ROE = 23.75%

Return on Assets = N/A

Total debt = 9.74B

Book value = 60.7

Qtrly Earnings Growth = -3.2%

Dividend yield 5 year average = 3.3%

Dividend rate = $ 3.24

Payout ratio = 23%

Dividend growth rate 3 year avg = 6.98%

Dividend growth rate 5 year avg = 8.19%

Consecutive dividend increases = 19 years

Paying dividends since = 1912

Total return last 3 years = 63.13%

Total return last 5 years = 66.3%

Notes

It has a very strong free cash flow of $40 billion and an incredibly strong interest coverage ratio of 1951. It also sports a good 5 year dividend growth average of 8.19%, a good ROE of 23% and has consecutively increased dividends for 19 years in a row; a true dividend champion.

Senior Housing Properties Trus (SNH)

Industry : REITs

Levered Free Cash Flow: 150.15M

Net income for the past three years

2008 = $106.52 million

2009 = $109.72 million

2010 = $116.49 million

Total cash flow from operating activities

2008 = $184.46 million

2009 = $209.4 million

2010 = $215.31 million

Key Ratios

P/E Ratio = 21.1

P/E High - Last 5 Yrs = 27.8

P/E Low - Last 5 Yrs = 9.7

Price to Sales = 8.32

Price to Book = 1.55

Price to Tangible Book = 1.55

Price to Cash Flow = 24.4

Price to Free Cash Flow = -4

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0.69

Total Debt to Equity = 0.69

Interest Coverage = 2.6

Inventory Turnover = N.A.

Asset Turnover = 0.1

ROE = 7.05%

Return on Assets = 4.14%

Total debt = 1.60B

Book value = 15.05

Qtrly Earnings Growth = 6.8%

Dividend yield 5 year average = 7.2%

Dividend rate = $ 1.52

Payout ratio = 142%

Dividend growth rate 3 year avg = 2.33%

Dividend growth rate 5 year avg = 2.43%

Consecutive dividend increases = 10 years

Paying dividends since = 1999

Total return last 3 years = 79.7%

Total return last 5 years = 12.8%

Notes

Net income and operating cash flow generally increasing for the past 3 year, a good 5 year dividend average of 7.2% and it has consecutively increased its dividend for 10 years in a row.

Hospitality Properties Trust (HPT)

Industry: REITs

Levered Free Cash Flow: 298.62M

Net income for the past three years

2008 = $134 million

2009 = $193.35 million

2010 = $21.36 million

2011= it stands at $153 and could top the $201 million mark.

Total cash flow from operating activities

2008 = $375.44 million

2009 = $320.12 million

2010 = $341.45 million

2011= It stands at $248 and could top the 329 million mark.

Key Ratios

P/E Ratio = 105.4

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

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

Price to Sales = 3.07

Price to Book = 1.28

Price to Tangible Book = 1.28

Price to Cash Flow = 106.3

Price to Free Cash Flow = 52.1

Quick Ratio = N.A.

Current Ratio = N.A.

LT Debt to Equity = 0.86

Total Debt to Equity = 0.86

Interest Coverage = 1.4

Inventory Turnover = N.A.

Asset Turnover = 0.2

ROE = 2.03%

Return on Assets = 4.15%

Total debt = 2.08B

Book value = 19.69

Qtrly Earnings Growth = -5.4%

Dividend yield 5 year average = 9.8%

Dividend rate = $ 1.80

Payout ratio = 750%

Dividend growth rate 3 year avg = 71.54%

Dividend growth rate 5 year avg = -14.52%

Paying dividends since = 1995

Total return last 3 years = 129.3%

Total return last 5 years = -25.85%

Notes

In general, both net income and operating cash flow have been rising for the past few years; after taking a hit in 2010, net income is set to surge strongly in 2011. It has a very strong 3 year dividend growth rate of 71%, a good 5 year dividend average o 9.8% and a strong 3 year total return of 129%. On the negative side, it sports a negative 5 year dividend growth rate and quarterly earnings growth has turned negative.

Western Gas Partners LP

Industry: Equipment & Services

Levered Free Cash Flow: 161.74M

Net income for the past three years

2008 = $65.28 million

2009 = $107.91 million

2010 = $126.07 million

2011= It stands at $109 and could top the $149 million mark.

Total cash flow from operating activities

2008 = $109.8 million

2009 = $164.87 million

2010 = $217.08 million

2011-= It stand at $201 and could top $290 million.

Key Ratios

P/E Ratio = 26.2

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

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

Price to Sales = 6.8

Price to Book = 2.68

Price to Tangible Book = 2.9

Price to Cash Flow = 18.2

Price to Free Cash Flow = 8.6

Quick Ratio = 3.4

Current Ratio = 3.5

LT Debt to Equity = 0.44

Total Debt to Equity = 0.44

Interest Coverage = 6.1

Inventory Turnover = N.A.

Asset Turnover = 0.3

ROE = 12.27%

Return on Assets = 5.09%

Total debt = 669.06M

Book value = 16.55

Qtrly Earnings Growth = 20.1%

Dividend rate = $ 1.66

Payout ratio = 89%

Dividend growth rate 3 year avg = 31.8%

Consecutive dividend increases = 3 years

Paying dividends since = 2008

Total return last 3 years = 217.89%

Total return last 5 years = N/A

Vodafone Group Plc (VOD)

Industry : Services

Levered Free Cash Flow: -4.33B

Net income for the past three years

2009 = $4.42 billion

2010 = $13.08 billion

2011 = $12.62 billion

Total cash flow from operating activities

2009 = $17.51 billion

2010 = $19.82 billion

2011 = $19.23 billion

Key Ratios

P/E Ratio = 11.4

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

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

Price to Sales = 1.87

Price to Book = 1.05

Price to Tangible Book = 4.51

Price to Cash Flow = 5.4

Price to Free Cash Flow = 221.3

Quick Ratio = 0.9

Current Ratio = 1

LT Debt to Equity = 0.35

Total Debt to Equity = 0.43

Interest Coverage = N.A.

Inventory Turnover = N.A.

Asset Turnover = 0

ROE = 7.97%

Return on Assets = 2.78%

Total debt = 56.66B

Book value = 25.75

Qtrly Earnings Growth = -11.4%

Dividend yield 5 year average = 5.8%

Dividend rate = $ 1.44

Payout ratio = 54%

Dividend growth rate 3 year avg = 18.31%

Dividend growth rate 5 year avg = 8.4%

Consecutive dividend increases = 2 years

Paying dividends since = 2006

Total return last 3 years = 68.03%

Total return last 5 years = 19.57%

Notes

It sports a manageable payout ratio of 54%, a good 3 year return of 68%, a decent 5 year dividend average of 5.8% and a fair current ratio of 1. On the negative side, quarterly earnings growth has turned negative, and it sports a below average quick ratio of 0.9.

Conclusion

We still feel that the markets are rather overbought on the short term time frames, and that long-term investors would be wise to wait for a strong pull back before committing large sums of new money to this market. Even though the markets have taken longer to pull back than expected, we still feel that a short and fast correction is in the works, and investors need to be a bit patient.

EPS and EPS surprise charts were sourced from zacks.com.

Disclaimer: 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.

Source: 5 Solid Stocks With Great Yields