Do you prefer stocks that pay handsome dividend income? For a closer look at dividend-yielding names, we ran a screen.
We began by screening stocks paying dividend yields above 2% and sustainable payout ratios below 50%. We then screened for those that appear undervalued relative to earnings growth, with PEG below 1.
Finally, we ran DuPont analysis on these stocks to find those with strong sources of profitability over the last year.
DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these 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)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks pay reliable dividends? Use this list as a starting point for your own analysis.
List sorted by PEG.
1. Advance America, Cash Advance Centers Inc. (AEA): Provides cash advance services in the United States, the United Kingdom, and Canada. Market cap at $657.93M, most recent closing price at $10.50. Dividend yield at 2.38%, payout ratio at 23.06%. PEG at 0.64. MRQ net profit margin at 14.54% vs. 9.83% y/y. MRQ sales/assets at 0.375 vs. 0.371 y/y. MRQ assets/equity at 1.684 vs. 1.836 y/y.
2. Symetra Financial Corporation (SYA): Operates as a financial services company in the life insurance industry in the United States. Market cap at $1.35B, most recent closing price at $11.55. Dividend yield at 2.46%, payout ratio at 13.13%. PEG at 0.81. 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.
3. Occidental Petroleum Corporation (OXY): Operates as an oil and gas exploration and production company primarily in the United States. Market cap at $71.54B, most recent closing price at $88.99. Dividend yield at 2.45%, payout ratio at 23.07%. PEG at 0.88. MRQ net profit margin at 26.98% vs. 23.83% y/y. MRQ sales/assets at 0.101 vs. 0.097 y/y. MRQ assets/equity at 1.596 vs. 1.614 y/y.
4. Protective Life Corp. (PL): Engages in the production, distribution, and administration of insurance and investment products in the United States. Market cap at $2.54B, most recent closing price at $28.48. Dividend yield at 2.27%, payout ratio at 15.48%. PEG at 0.9. MRQ net profit margin at 10.13% vs. 9.94% y/y. MRQ sales/assets at 0.017 vs. 0.017 y/y. MRQ assets/equity at 12.542 vs. 14.278 y/y.
5. Snap-on Inc. (SNA): Manufactures and markets tools, diagnostics, equipment, software, and service solutions for professional users in the United States, the United Kingdom, Canada, Germany, Japan, France, Australia, Spain, the Netherlands, Italy, China, and Sweden. Market cap at $3.6B, most recent closing price at $62.51. Dividend yield at 2.20%, payout ratio at 26.76%. PEG at 0.96. MRQ net profit margin at 9.66% vs. 8.1% y/y. MRQ sales/assets at 0.198 vs. 0.181 y/y. MRQ assets/equity at 2.314 vs. 2.578 y/y.
6. Einstein Noah Restaurant Group, Inc. (BAGL): Operates, franchises, and licenses bagel specialty restaurants in the United States. Market cap at $239.53M, most recent closing price at $14.48. Dividend yield at 3.52%, payout ratio at 47.66%. PEG at 1. MRQ net profit margin at 5.32% vs. 3.16% y/y. MRQ sales/assets at 0.562 vs. 0.517 y/y. MRQ assets/equity at 2.332 vs. 2.65 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.