One of the most important considerations for dividend stocks is whether the company is profitable enough to sustain its dividend. Keeping this idea in mind, we ran a screen on highly profitable dividend stocks.
We began by screening for stocks paying dividend yields above 2% and sustainable payout ratios below 50%. We then screened for those with healthy liquidity, with current ratios above 3. Since the current ratio equals current assets/current liabilities, companies with current ratios above 3 have at least 3 times liquid assets to cover their short-term liabilities.
Finally, to screen for companies that also have strong profitability, we screened for those with higher gross, operating, and pretax margins than their industry averages. We also screened for those with higher pretax profit margins than their industry averages by at least 5%.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the 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 are profitable enough to continue paying their dividends? Use this list as a starting point for your own analysis.
List sorted by difference between pretax margin and industry average.
1. GrupoAeroportuario Del Sureste SA de CV (ASR): Holds concessions to operate, maintain, and develop airports in the southeast region of Mexico. Market cap at $2.26B. Price at $76.17. Dividend yield at 3.38%, payout ratio at 48.36%.Current ratio at 3.03. TTM gross margin at 56.1% vs. industry average at 47.01%. TTM operating margin at 44.06% vs. industry average at 28.24%.TTM pretax margin at 45.17% vs. industry average at 25.72%.
2. RPC Inc. (RES): Provides a range of oilfield services and equipment to the oil and gas companies primarily in the United States. Market cap at $1.99B. Price at $9.05. Dividend yield at 3.53%, payout ratio at 15.97%.Current ratio at 3.49. TTM gross margin at 45.15% vs. industry average at 34.32%. TTM operating margin at 26.85% vs. industry average at 18.03%.TTM pretax margin at 26.46% vs. industry average at 13.54%.
3. KLA-Tencor Corporation (KLAC): Engages in the design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Market cap at $8.90B. Price at $52.69. Dividend yield at 2.62%, payout ratio at 26.45%.Current ratio at 4.52. TTM gross margin at 61.96% vs. industry average at 59.54%. TTM operating margin at 34.28% vs. industry average at 23.3%.TTM pretax margin at 32.53% vs. industry average at 22.23%.
4. St. Jude Medical Inc. (STJ): Develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. Market cap at $12.02B. Price at $38.14. Dividend yield at 2.40%, payout ratio at 32.93%.Current ratio at 3.19. TTM gross margin at 79.34% vs. industry average at 65.53%. TTM operating margin at 24.97% vs. industry average at 14.26%.TTM pretax margin at 18.16% vs. industry average at 11.24%.
5. Guess? Inc. (GES): Engages in the design, marketing, distribution, and licensing of apparel and accessories for men, women, and children. Market cap at $2.65B. Price at $29.86. Dividend yield at 2.71%, payout ratio at 28.15%.Current ratio at 3. TTM gross margin at 43.72% vs. industry average at 37.95%. TTM operating margin at 11.55% vs. industry average at 10.21%.TTM pretax margin at 15.56% vs. industry average at 9.4%.
6. Xilinx Inc. (XLNX): Designs, develops, and markets programmable platforms in North America, the Asia Pacific, Europe, and Japan. Market cap at $9.17B. Price at $34.46. Dividend yield at 2.51%, payout ratio at 33.84%.Current ratio at 6.15. TTM gross margin at 67.03% vs. industry average at 59.54%. TTM operating margin at 29.56% vs. industry average at 23.3%.TTM pretax margin at 27.56% vs. industry average at 22.23%.
*Profitability data sourced from Fidelity, 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.
