Do you prefer the largest and established stocks? Interested in finding stocks that pay reliable dividends? Do you look for companies with low debt? Company liquidity is an important consideration in any stock analysis. Liquidity gives a company the ability to make big acquisitions if it sees investment opportunities, a cushion for future lulls in demand, and most importantly, it keeps a company's doors open. Are these the types of stocks that you're looking for? For ideas on how to start your search, we ran a screen you may find helpful.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for large cap dividend stocks. From here, we then looked for companies that operate with little to no debt (D/E Ratio<.3). We next screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these large-cap stocks should have higher valuations? Use our list to help with your own analysis.
1) Corning Inc. (NYSE:GLW)
Corning Inc. has a Dividend yield of 2.09% and Debt/Equity Ratio of 0.15 and Current Ratio of 5.50 and Quick Ratio of 4.97. The short interest was 1.90% as of 05/01/2012. Corning Incorporated produces specialty glasses, ceramics, and related materials worldwide. The company operates in five segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences. The Display Technologies segment manufactures glass substrates for liquid crystal displays (LCDs) for notebook computers, flat panel desktop monitors, and LCD televisions. The Telecommunications segment produces optical fiber and cable, and hardware and equipment products, including cable assemblies, fiber optic hardware, fiber optic connectors, optical components and couplers, closures and pedestals, splice and test equipment, and other accessories for optical connectivity to the telecommunications industry.
2) Coach, Inc. (NYSE:COH)
|Industry:||Textile - Apparel Footwear & Accessories|
Coach, Inc. has a Dividend yield of 1.23% and Debt/Equity Ratio of 0.01 and Current Ratio of 2.82 and Quick Ratio of 2.06. The short interest was 1.23% as of 05/01/2012. Coach, Inc. designs and markets accessories and gifts for women and men in the United States and internationally. It primarily offers handbags, women's and men's bag, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches, and fragrance products. The company's accessories, include money pieces, wristlets, cosmetic cases, wallets, card cases, time management and electronic accessories, key rings, charms, and women's and men's belts; business cases, such as computer bags, messenger-style bags, and totes; wearables comprise jackets, sweaters, gloves, hats, and scarves; jewelry consisting of bangle bracelets, necklaces, rings, and earrings; and luggage and related accessories, such as travel kits and valet trays.
3) Fastenal Company (NASDAQ:FAST)
|Industry:||General Building Materials|
Fastenal Company has a Dividend yield of 1.45% and Debt/Equity Ratio of 0.00 and Current Ratio of 5.71 and Quick Ratio of 2.97. The short interest was 6.46% as of 05/01/2012. Fastenal Company, together with its subsidiaries, operates as a wholesaler and retailer of industrial and construction supplies in the United States and internationally. It offers fastener product line under two categories, which include threaded fasteners, such as bolts, nuts, screws, studs, and related washers that are used in manufactured products and building projects, as well as in the maintenance and repair of machines and structures; and miscellaneous supplies and hardware comprising various pins and machinery keys, concrete anchors, metal framing systems, wire ropes, strut products, rivets, and related accessories. The company serves the construction market, which consists of general, electrical, plumbing, sheet metal, and road contractors; and manufacturing market, including original equipment manufacturers, and maintenance and repair operations, as well as other users, such as farmers, truckers, railroads, mining companies, federal, state and local governmental entities, schools, and retail trades.
4) Activision Blizzard, Inc. (NASDAQ:ATVI)
|Industry:||Multimedia & Graphics Software|
Activision Blizzard, Inc. has a Dividend yield of 1.40% and Debt/Equity Ratio of 0.00 and Current Ratio of 2.10 and Quick Ratio of 2.05. The short interest was 2.44% as of 05/01/2012. Activision Blizzard, Inc. publishes online, personal computer (PC), console, handheld, and mobile interactive entertainment worldwide. It develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.