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"Strangers are exciting, their mystery never ends. But, there's nothing like looking at your own history in the faces of your friends."

Ani Difranco

In the "learning to fish series"; we hope by listing examples and providing a number of reasons for our choice; we will be able to impart some knowledge to novice investors.

A batch of ratios will be used throughout this article, and we feel that investors would best be served if they got a handle on some of the more important ratios; they could prove to be very useful to the selection process. Before we delve into these ratios and provide general selection guidelines, we are going to start off by listing our top pick.

Markwest Energy Partners (MWE) is our play of choice for the following reasons:

  • It has a good yield of 5.13%
  • A decent five year dividend growth rate of 8.9%
  • A 5 year dividend average of 8.98%
  • It sports a good quarterly earnings growth rate of 20%
  • Net Income surged from $-119 million in 2009 to $61 million in 2011.
  • Zacks projects a 3-5 year EPS growth rate of 10.7%
  • EBITDA increased from $78 million in 2009 to $433 million in 2011.
  • Cash flow per share surged more than 700% from $.042 in 2009 to $3.56 in 2011
  • Sales more than doubled from $738 million in 2009 to $1.5 billion in 2011
  • Annual EPS before NRI skyrocketed from $ 0.12 in 2009 to $1.75 in 2011.
  • A very strong three year total return of 450%
  • A great five year sales growth of 20%
  • A projected growth rate of 48% for 2012 and 28% for 2012
  • $100K invested for 10 years would have grown to $661K

click to enlarge

Company : Markwest Energy partners

Levered Free Cash Flow = -205.00M

Basic Key ratios

  1. Percentage Held by Insiders = 1.8
  2. Number of Institutional Sellers 12 Weeks = 4

Growth

  1. Net Income ($mil) 12/2011 = 61
  2. Net Income ($mil) 12/2010 = 0
  3. Net Income ($mil) 12/2009 = -119
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 12896.79
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = -36.92
  1. EBITDA ($mil) 12/2011 = 433
  2. EBITDA ($mil) 12/2010 = 313
  3. EBITDA ($mil) 12/2009 = 78
  4. Net Income Reported Quarterlytr ($mil) = -74
  5. Annual Net Income this Yr/ Net Income last Yr = 13093.48
  6. Cash Flow ($/share) 12/2011 = 3.56
  7. Cash Flow ($/share) 12/2010 = 3.1
  8. Cash Flow ($/share) 12/2009 = 0.42
  1. Sales ($mil) 12/2011 = 1505
  2. Sales ($mil) 12/2010 = 1188
  3. Sales ($mil) 12/2009 = 738
  1. Annual EPS before NRI 12/2007 = 0.12
  2. Annual EPS before NRI 12/2008 = 1.03
  3. Annual EPS before NRI 12/2009 = -1.97
  4. Annual EPS before NRI 12/2010 = 0.65
  5. Annual EPS before NRI 12/2011 = 1.75

Dividend history

  1. Dividend Yield = 5.13
  2. Dividend Yield 5 Year Average 12/2011 = 8.98
  3. Annual Dividend 12/2011 = 2.75
  4. Annual Dividend 12/2010 = 2.56
  5. Forward Yield = 5.13
  6. Dividend 5 year Growth 12/2011 = 8.9%
  1. Dividend sustainability
  2. Payout Ratio 06/2011 = 0.93
  3. Payout Ratio 5 Year Average 12/2011 = 7.73
  4. Payout Ratio 5 Year Average 09/2011 = 7.73
  5. Payout Ratio 5 Year Average 06/2011 = 7.34
  6. Change in Payout Ratio = -6.8

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 13.86
  2. Next 3-5 Year Estimate EPS Growth rate = 10.7
  3. EPS Growth Quarterly(1)/Q(-3) = -142.31
  4. ROE 5 Year Average 12/2011 = 6.77
  5. ROE 5 Year Average 09/2011 = 6.77
  6. ROE 5 Year Average 06/2011 = 7.11
  7. Return on Investment 06/2011 = 7.67
  8. Debt/Total Cap 5 Year Average 12/2011 = 48
  9. Debt/Total Cap 5 Year Average 09/2011 = 48
  10. Debt/Total Cap 5 Year Average 06/2011 = 48.43
  1. Current Ratio 06/2011 = 1.01
  2. Current Ratio 5 Year Average = 1.02
  3. Quick Ratio = 0.92
  4. Cash Ratio = 0.4
  5. Interest Coverage= 1.70

Valuation

  1. Book Value Quarterly = 15.82
  2. Price/ Book = 3.74
  3. Price/ Cash Flow = 16.62
  4. Price/ Sales = 4.01
  5. EV/EBITDA 12 Mo = 17.88

Company : Ill Tool Works (ITW)

Levered Free Cash Flow = 770.13M

Basic Key ratios

  1. Percentage Held by Insiders = 3.21
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 2071
  2. Net Income ($mil) 12/2010 = 1503
  3. Net Income ($mil) 12/2009 = 973
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 35.63
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 12.58
  1. EBITDA ($mil) 12/2011 = 3379
  2. EBITDA ($mil) 12/2010 = 2813
  3. EBITDA ($mil) 12/2009 = 2063
  4. Net Income Reported Quarterlytr ($mil) = 442
  5. Annual Net Income this Yr/ Net Income last Yr = 37.82
  6. Cash Flow ($/share) 12/2011 = 5.4
  7. Cash Flow ($/share) 12/2010 = 4.19
  8. Cash Flow ($/share) 12/2009 = 3.56
  1. Sales ($mil) 12/2011 = 17787
  2. Sales ($mil) 12/2010 = 15870
  3. Sales ($mil) 12/2009 = 13877
  1. Annual EPS before NRI 12/2007 = 3.28
  2. Annual EPS before NRI 12/2008 = 3.04
  3. Annual EPS before NRI 12/2009 = 2.19
  4. Annual EPS before NRI 12/2010 = 3.03
  5. Annual EPS before NRI 12/2011 = 4.08

Dividend history

  1. Dividend Yield = 2.53
  2. Dividend Yield 5 Year Average 12/2011 = 2.69
  3. Dividend Yield 5 Year Average 09/2011 = 2.69
  4. Annual Dividend 12/2011 = 1.4
  5. Annual Dividend 12/2010 = 1.3
  6. Forward Yield = 2.53
  7. Dividend 5 year Growth 12/2011 = 7.62

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.38
  2. Payout Ratio 5 Year Average 12/2011 = 0.44
  3. Payout Ratio 5 Year Average 09/2011 = 0.44
  4. Payout Ratio 5 Year Average 06/2011 = 0.43
  5. Change in Payout Ratio = -0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -1.47
  2. Next 3-5 Year Estimate EPS Growth rate = 12.35
  3. EPS Growth Quarterly(1)/Q(-3) = 101.1
  4. ROE 5 Year Average 12/2011 = 17.08
  5. ROE 5 Year Average 09/2011 = 17.08
  6. ROE 5 Year Average 06/2011 = 17.21
  7. Return on Investment 06/2011 = 14.13
  8. Debt/Total Cap 5 Year Average 12/2011 = 20.19
  9. Debt/Total Cap 5 Year Average 09/2011 = 20.19
  10. Debt/Total Cap 5 Year Average 06/2011 = 19.65
  1. Current Ratio 06/2011 = 2.3
  2. Current Ratio 5 Year Average = 1.92
  3. Quick Ratio = 1.73
  4. Cash Ratio = 0.78
  5. Interest Coverage Quarterly = 11.66

Valuation

  1. Book Value Quarterly = 20.77
  2. Price/ Book = 2.74
  3. Price/ Cash Flow = 10.54
  4. Price/ Sales = 1.53
  5. EV/EBITDA 12 Mo = 8.8

Company : Halliburton Co (HAL)

Levered Free Cash Flow = 867.12M

Basic Key ratios

  1. Percentage Held by Insiders = 0.36
  2. Market Cap ($mil) = 29887

Growth

  1. Net Income ($mil) 12/2011 = 2839
  2. Net Income ($mil) 12/2010 = 1835
  3. Net Income ($mil) 12/2009 = 1145
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 54.71
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 49.75
  1. EBITDA ($mil) 12/2011 = 6071
  2. EBITDA ($mil) 12/2010 = 4071
  3. EBITDA ($mil) 12/2009 = 2898
  4. Net Income Reported Quarterlytr ($mil) = 906
  5. Annual Net Income this Yr/ Net Income last Yr = 54.71
  6. Cash Flow ($/share) 12/2011 = 4.84
  7. Cash Flow ($/share) 12/2010 = 3.3
  8. Cash Flow ($/share) 12/2009 = 2.38
  1. Sales ($mil) 12/2011 = 24829
  2. Sales ($mil) 12/2010 = 17973
  3. Sales ($mil) 12/2009 = 14675
  1. Annual EPS before NRI 12/2007 = 2.66
  2. Annual EPS before NRI 12/2008 = 2.94
  3. Annual EPS before NRI 12/2009 = 1.35
  4. Annual EPS before NRI 12/2010 = 2.06
  5. Annual EPS before NRI 12/2011 = 3.36

Dividend history

  1. Dividend Yield = 1.11
  2. Dividend Yield 5 Year Average =1.2%
  3. Annual Dividend 12/2011 = 0.36
  4. Annual Dividend 12/2010 = 0.36
  5. Forward Yield = 1.11
  6. Dividend 5 year Growth =3.01%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.11
  2. Payout Ratio 5 Year Average 06/2011 = 0.17
  3. Change in Payout Ratio = -0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -37.99
  2. Next 3-5 Year Estimate EPS Growth rate = 13
  3. EPS Growth Quarterly(1)/Q(-3) = -147.06
  4. ROE 5 Year Average 06/2011 = 26.47
  5. Return on Investment 06/2011 = 19.18
  6. Debt/Total Cap 5 Year Average 06/2011 = 28.8

  1. Current Ratio 06/2011 = 2.81
  2. Current Ratio 5 Year Average = 3.08
  3. Quick Ratio = 2.19
  4. Cash Ratio = 0.95
  5. Interest Coverage Quarterly = 20.62

Valuation

  1. Book Value Quarterly = 14.36
  2. Price/ Book = 2.26
  3. Price/ Cash Flow = 6.71
  4. Price/ Sales = 1.2
  5. EV/EBITDA 12 Mo = 5.25

Company : Philip Morris (PM)

Levered Free Cash Flow = 9.22B

Basic Key ratios

  1. Percentage Held by Insiders = 0.34
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 8591
  2. Net Income ($mil) 12/2010 = 7259
  3. Net Income ($mil) 12/2009 = 6342
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 18.35
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 7.65
  1. EBITDA ($mil) 12/2011 = 14325
  2. EBITDA ($mil) 12/2010 = 12132
  3. EBITDA ($mil) 12/2009 = 10893
  4. Net Income Reported Quarterlytr ($mil) = 1886
  5. Annual Net Income this Yr/ Net Income last Yr = 18.35
  6. Cash Flow ($/share) 12/2011 = 5.55
  7. Cash Flow ($/share) 12/2010 = 4.46
  8. Cash Flow ($/share) 12/2009 = 3.83
  1. Sales ($mil) 12/2011 = 76346
  2. Sales ($mil) 12/2010 = 67713
  3. Sales ($mil) 12/2009 = 62080
  1. Annual EPS before NRI 12/2007 = 2.8
  2. Annual EPS before NRI 12/2008 = 3.24
  3. Annual EPS before NRI 12/2009 = 3.29
  4. Annual EPS before NRI 12/2010 = 3.87
  5. Annual EPS before NRI 12/2011 = 4.88

Dividend history

  1. Dividend Yield = 3.46
  2. Dividend Yield 5 Year Average 12/2011 = 4.26
  3. Dividend Yield 5 Year Average 09/2011 = 4.26
  4. Annual Dividend 12/2011 = 2.82
  5. Annual Dividend 12/2010 = 2.44
  6. Forward Yield = 3.46
  7. Dividend 5 year Growth 12/2011 = 12.32

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.63
  2. Payout Ratio 5 Year Average 12/2011 = 0.66
  3. Payout Ratio 5 Year Average 09/2011 = 0.66
  4. Payout Ratio 5 Year Average 06/2011 = 0.66
  5. Change in Payout Ratio = -0.03

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 27.99
  2. Next 3-5 Year Estimate EPS Growth rate = 10
  3. EPS Growth Quarterly(1)/Q(-3) = -103.77
  4. ROE 5 Year Average 12/2011 = 139.04
  5. ROE 5 Year Average 09/2011 = 139.04
  6. ROE 5 Year Average 06/2011 = 139.04
  7. Return on Investment 06/2011 = 50.3
  8. Debt/Total Cap 5 Year Average 12/2011 = 67.43
  9. Debt/Total Cap 5 Year Average 09/2011 = 67.43
  10. Debt/Total Cap 5 Year Average 06/2011 = 67.43
  1. Current Ratio 06/2011 = 1
  2. Current Ratio 5 Year Average = 1.3
  3. Quick Ratio = 0.46
  4. Cash Ratio = 0.24
  5. Interest Coverage Quarterly = 15.7

Valuation

  1. Book Value Quarterly = 0.32
  2. Price/ Book = 280.5
  3. Price/ Cash Flow = 16.04
  4. Price/ Sales = 2.01
  5. EV/EBITDA 12 Mo = 11.55

Company : Praxair Inc (PX)

Levered Free Cash Flow = 615.50M

Growth

  1. Net Income ($mil) 12/2011 = 1672
  2. Net Income ($mil) 12/2010 = 1195
  3. Net Income ($mil) 12/2009 = 1254
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 39.92
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 215.79
  1. EBITDA ($mil) 12/2011 = 3471
  2. EBITDA ($mil) 12/2010 = 3007
  3. EBITDA ($mil) 12/2009 = 2421
  4. Net Income Reported Quarterlytr ($mil) = 420
  5. Annual Net Income this Yr/ Net Income last Yr = 39.92
  6. Cash Flow ($/share) 12/2011 = 8.9
  7. Cash Flow ($/share) 12/2010 = 7.84
  8. Cash Flow ($/share) 12/2009 = 6.83
  1. Sales ($mil) 12/2011 = 11252
  2. Sales ($mil) 12/2010 = 10116
  3. Sales ($mil) 12/2009 = 8956
  1. Annual EPS before NRI 12/2007 = 3.62
  2. Annual EPS before NRI 12/2008 = 4.2
  3. Annual EPS before NRI 12/2009 = 3.99
  4. Annual EPS before NRI 12/2010 = 4.74
  5. Annual EPS before NRI 12/2011 = 5.43

Dividend history

Dividend Yield = 1.92

Dividend Yield 5 Year Average 12/2011 = 1.94

Dividend Yield 5 Year Average 09/2011 = 1.94

Annual Dividend 12/2011 = 2

Annual Dividend 12/2010 = 1.8

Forward Yield = 1.92

Dividend 5 year Growth 12/2011 = 12.32

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.37
  2. Payout Ratio 5 Year Average 12/2011 = 0.38
  3. Payout Ratio 5 Year Average 09/2011 = 0.38
  4. Payout Ratio 5 Year Average 06/2011 = 0.38
  5. Change in Payout Ratio = -0.02

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 5.05
  2. Next 3-5 Year Estimate EPS Growth rate = 11.78
  3. EPS Growth Quarterly(1)/Q(-3) = -105.43
  4. ROE 5 Year Average 12/2011 = 25.07
  5. ROE 5 Year Average 09/2011 = 25.07
  6. ROE 5 Year Average 06/2011 = 24.97
  7. Return on Investment 06/2011 = 13.81
  8. Debt/Total Cap 5 Year Average 12/2011 = 45.07
  9. Debt/Total Cap 5 Year Average 09/2011 = 45.07
  10. Debt/Total Cap 5 Year Average 06/2011 = 45.06
  1. Current Ratio 06/2011 = 1.03
  2. Current Ratio 5 Year Average = 1.09
  3. Quick Ratio = 0.85
  4. Cash Ratio = 0.14
  5. Interest Coverage Quarterly = 16.26

Valuation

  1. Book Value Quarterly = 19.34
  2. Price/ Book = 5.94
  3. Price/ Cash Flow = 12.89
  4. Price/ Sales = 3.05
  5. EV/EBITDA 12 Mo = 11.53

Conclusion

The markets are rather overbought and need to let out some steam; prudent investors would do well to wait for a strong pullback before committing funds to this market. A pullback in the 7-12% ranges would qualify as a strong pullback.

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

Note on the data in this piece: EPS, Price, EPS surprise charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Consensus estimate analysis table sourced from reuters.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com

Source: 5 Appealing Dividend Candidates: Markwest Energy Partners Is Our Play Of Choice