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Investors should take the time to understand the following key ratios as many of them have been used in this article; getting a handle on these ratios could mean the difference of choosing 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 for 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.

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 than 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.

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. Individuals searching for other ideas might find this article to be of interest "5 Super Utility Stocks With Stellar Records And Splendid yields."

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 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-earnings ratio.

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 dividing them 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 Super Dividend Stocks With Stellar Records."

RPM International Inc (NYSE: RPM) is our play of choice for the following reasons.

  1. It has a 5-year dividend growth rate of 4.16%
  2. A five-year dividend average of 4.14%
  3. It sports a very strong 3-year return of 120%
  4. It has consecutively increased its dividend for 38 years in a row
  5. It has a decent quarterly revenue growth rate of 10%
  6. Net income has been increasing very nicely for the past 3 years
  7. It has a good quick and current ratio of 1.91 and 2.64 respectively
  8. It sports a decent LT debt to equity ratio of 0.87
  9. It has a decent interest coverage ratio of 4.32
  10. 100K invested for 10 years would have grown to 213K
  11. A great payout ratio of only 57%

Stock

Dividend Yield (%)

Enterprise Value

Forward PE

EBITDA

Quarterly Revenue Growth

Beta

Revenue

Operating Cash flow

RPM

3.40

4.04B

14.59

430.35M

10.90%

1.40

3.56B

165.08M

PNY

3.40

3.43B

18.9

314.12M

-1.10%

0.31

1.43B

311.24M

PEP

3.30

120.44B

14.12

13.11B

11.00%

0.51

66.50B

8.94B

STR

3.30

4.80B

15.66

536.10M

-2.20%

0.73

1.19B

489.00M

EMR

3.10

41.37B

12.94

4.93B

-4.10%

1.23

24.00B

3.24B

RPM International Inc

Industry : Specialty Chemicals

Levered Free Cash Flow: 87.46M

Net income for the past three years

Net Income ($mil) 2009 = $120

Net Income ($mil) 2010 = $180

Net Income ($mil) 2011 = $189

Total cash flow from operating activities

2009 = $267 million

2010 = $203.94 million

2011 = $238.17 million

Key Ratios

P/E Ratio = 16.7

P/E High - Last 5 Yrs = 66

P/E Low - Last 5 Yrs = 9.4

Price to Sales = 0.94

Price to Book = 2.4

Price to Tangible Book = 92.76

Price to Cash Flow = 12.64

Price to Free Cash Flow = -24.1

Quick Ratio = 1.91

Current Ratio = 2.64

LT Debt to Equity = 0.87

Total Debt to Equity = 0.79

Interest Coverage = 5.26

Inventory Turnover = 4.32

Asset Turnover = 1.04

ROE = 14.26%

Return on Assests = 5.78%

Qtrly Earnings Growth = 2.3%

Dividend yield 5-year average = 4.14%

Payout ratio = 0.57

Dividend growth rate 3-year avg = 2.91%

Dividend growth rate 5-year avg = 4.16%

Consecutive dividend increases = 38 years

Paying dividends since = 1969

Total return last 3 years = 120.67%

Total return last 5 years = 24.12%

Piedmont Natural Gas Co., Inc.

Industry : Gas Utilities

Levered Free Cash Flow : 3.53M

Net income for the past three years

Net Income ($mil) 2009 = $123

Net Income ($mil) 2010 = $142

Net Income ($mil) 2011 = $114

Total cash flow from operating activities

2009 = $344.27 million

2010 = $360.52 million

2011 = $311.25 million

Key Ratios

P/E Ratio = 21.4

P/E High - Last 5 Yrs = 23.7

P/E Low - Last 5 Yrs = 11.5

Price to Sales = 1.7

Price to Book = 2.44

Price to Tangible Book = 2.57

Price to Cash Flow = 11.02

Price to Free Cash Flow = -159

Quick Ratio = 0.36

Current Ratio = 0.54

LT Debt to Equity = 0.68

Total Debt to Equity = 0.68

Interest Coverage = 8.79

Inventory Turnover = 11.66

Asset Turnover = 0.44

ROE = 11.13%

Return on Assests = 3.55%

Qtrly Earnings Growth = N/A

Dividend yield 5-year average = 3.96%

Payout ratio = 0.74

Dividend growth rate 3-year avg = 3.71%

Dividend growth rate 5-year avg = 3.85%

Consecutive dividend increases = 32 years

Paying dividends since = 1956

Total return last 3 years = 44.12%

Total return last 5 years = 47.75%

Notes

A weak quick and current ratio but on the bright side it sports a healthy interest coverage ratio of 8.79. It also has a manageable payout ratio of 74% and has increased dividends consecutively for 32 years.

PepsiCo Inc.

Industry : Beverages

Levered Free Cash Flow: 4.81B

Net income for the past three years

Net Income ($mil) 2009 = $5946

Net Income ($mil) 2010 = $6320

Net Income ($mil) 2011 = $6443

Total cash flow from operating activities

2008 = $7 billion

2009 = $6.8 billion

2010 = $8.45 billion

Key Ratios

P/E Ratio = 15.6

P/E High - Last 5 Yrs = 24.9

P/E Low - Last 5 Yrs = 11.6

Price to Sales = 1.47

Price to Book = 4.66

Price to Tangible Book = 20.26

Price to Cash Flow = 10.03

Price to Free Cash Flow = -710.1

Quick Ratio = 0.75

Current Ratio = 0.96

LT Debt to Equity = 0.93

Total Debt to Equity = 0.98

Interest Coverage = 8.35

Inventory Turnover = 7.71

Asset Turnover = 0.91

ROE = 30.12%

Return on Assests = 9.47%

Qtrly Earnings Growth = 3.7%

Dividend yield 5-year average = 2.74%

Payout ratio = 0.47

Dividend growth rate 3-year avg = 7.07%

Dividend growth rate 5-year avg = 9.03%

Consecutive dividend increases = 40 years

Paying dividends since = 1952

Total return last 3 years = 32.93%

Total return last 5 years = 11.36%

Notes

A good ROE of 30%, it has increased dividends consecutively for 40 years, sports a good 5-year dividend growth average of 9% and has a very strong levered free cash flow of $4.8 billion. On the negative side it has a weak quick and current ratio (0.75 and 0.96 respectively) but a decent interest coverage ratio of 8.35

Questar Corp.

Industry: Gas Utilities

Levered Free Cash Flow: 86.69M

Net income for the past three years

Net Income ($mil) 2009 = $393

Net Income ($mil) 2010 = $339

Net Income ($mil) 2011 = $208

Total cash flow from operating activities

2008 = $1.5 billion

2009 = $428.8 million

2010 = $350.9 million

Key Ratios

P/E Ratio = 17

P/E High - Last 5 Yrs = 20.4

P/E Low - Last 5 Yrs = 1.8

Price to Sales = 2.94

Price to Book = 3.39

Price to Tangible Book = 3.21

Price to Cash Flow = 9.3

Price to Free Cash Flow = 267.7

Quick Ratio = 0.47

Current Ratio = 0.59

LT Debt to Equity = 0.81

Total Debt to Equity = 0.96

Interest Coverage = 8.58

Inventory Turnover = 9.35

Asset Turnover = 0.34

ROE = 19.24%

Return on Assests = 6.23%

Qtrly Earnings Growth = -3.3%

Dividend yield 5-year average = 1.82%

Payout ratio = 0.57

Dividend growth rate 3-year avg = 8.08%

Dividend growth rate 5-year avg = 6.01%

Consecutive dividend increases = 32 years

Paying dividends since = 1935

Total return last 3 years = 102.92%

Total return last 5 years = 65.61%

Notes

It has a manageable payout ratio of 57%, a strong 3-year return of 102%, a 5-year dividend growth rate of 6.01% and a stellar history of consecutively increased dividends for 32 years. On the negative side net income and operating cash flow have been dropping for the past 3 years and it sports a weak quick and current ratio of .47 and 0.59 respectively. It does however sport a decent interest coverage ratio of 8.58.

Emerson Electric Co.

Industry : Electrical Equipment

Levered Free Cash Flow: 2.64B

Net income for the past three years

Net Income ($mil) 2009 = $1724

Net Income ($mil) 2010 = $2164

Net Income ($mil) 2011 = $2480

Total cash flow from operating activities

2009 = $3.09 billion

2010 = $3.3 billion

2011 = $3.24 billion

Key Ratios

P/E Ratio = 16.4

P/E High - Last 5 Yrs = 20.2

P/E Low - Last 5 Yrs = 10.7

Price to Sales = 1.58

Price to Book = 3.67

Price to Tangible Book = -88.79

Price to Cash Flow = 11.55

Price to Free Cash Flow = 27.3

Quick Ratio = 1.12

Current Ratio = 1.39

LT Debt to Equity = 0.4

Total Debt to Equity = 0.39

Interest Coverage = 10.53

Inventory Turnover = 6.35

Asset Turnover = 1.02

ROE = 21.97%

Return on Assests = 9.88%

Qtrly Earnings Growth = -22.7%

Dividend yield 5-year average = 2.85%

Payout ratio = 0.51

Dividend growth rate 3-year avg = 5.79%

Dividend growth rate 5-year avg = 6.84%

Consecutive dividend increases = 55 years

Paying dividends since = 1947

Total return last 3 years = 86.41%

Total return last 5 years = 28.12%

Notes

It has a very strong levered free cash flow of $2.6 billion, a decent 5-year dividend growth rate of 6.84%, 3-year total return of 86% and incredible history of consecutively increasing its dividends for 55 years. It also sports a manageable payout ratio of 51%, a good quick and current ratio of 1.12 and 1.39 respectively. It has a decent interest coverage ratio of 10.53 and a low LT debt to Equity ratio of 0.4. This is a great long term play and true dividend champion.

Conclusion

Long-term investors should wait for a strong pull back before committing large sums of fresh money to this market.

All EPS charts provided by Zacks.com and all dividend history 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.

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: Dividend Kings With Divine Yields