The companies which have long-term competitive advantage tend to have higher Gross Margin than those that don't. Gross margin shows the percentage of surplus generated per unit of the product or service sold. To have a high gross margin, a company should be efficient enough not only to recover the costs of the product or service sold, but also to provide extra income to cover costs of acceptance of risk, operating expenses, and the costs of debt.
We believe one of the best alternatives for conservative income investors is selecting dividend stocks with high gross margin. Below we complied a list of 5 stocks that have a gross margin of higher than 60%, market cap of over $10 billion and dividend yields of higher than 3%. We obtained market data from Finviz and Morningstar.
Stock | Market Cap | Sector* | Dividend Yield | P/E | Beta | Gross Margin |
Analog Devices (ADI) | 11.4 | 1 | 3.1% | 15.0 | 1.08 | 65.7% |
BlackRock (BLK) | 32.9 | 2 | 3.3% | 14.5 | 1.51 | 89.3% |
CA Technologies (CA) | 12.6 | 1 | 3.7% | 14.7 | 1.02 | 86.8% |
Eli Lilly (LLY) | 47.9 | 3 | 4.8% | 10.7 | 0.68 | 78.9% |
Waste Management (WM) | 15.9 | 4 | 4.1% | 17.0 | 0.54 | 77.9% |
* 1-Technology, 2-Financial, 3-Healthcare, 4-Industrial Goods
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1. Analog Devices : ADI is an multinational semiconductor company. ADI recently traded at $37.46 and has a 3.1% dividend yield. ADI lost 2.6% during the past 12 months. The stock has a market cap of $11.4 billion, P/E ratio of 15 and Total Debt/Equity ratio of 0.23. ADI also had an EPS growth rate of 14.8% during the last five years.
2. BlackRock : BlackRock is a publicly owned investment manager. BLK is also one of the stocks that have seen insider buying recently. BLK recently traded at $184.15 and has a 3.3% dividend yield. BLK lost 2.6% during the past 12 months. The stock has a market cap of $32.9 billion and P/E ratio of 14.5. BLK also had an EPS growth rate of 26.2% during the last five years.
3. CA Technologies : CA Technologies provides information technology management software products. CA recently traded at $26.21 and has a 3.7% dividend yield. CA gained 11.2% during the past 12 months. The stock has a market cap of $12.6 billion, P/E ratio of 14.7 and Total Debt/Equity ratio of 0.23. CA also had an EPS growth rate of 42.6% during the last five years.
4. Eli Lilly & Co. : Eli Lilly provides pharmaceutical products worldwide. LLY recently traded at $41.25 and has a 4.8% dividend yield. LLY gained 14.1% during the past 12 months. The stock has a market cap of $47.9 billion, P/E ratio of 10.7 and Total Debt/Equity ratio of 0.37. LLY also had an EPS growth rate of 9.8% during the last five years.
5. Waste Management, Inc. : Waste Management provides waste management services in North America. WM recently traded at $33.97 and has a 4.1% dividend yield. WM lost 8.6% during the past 12 months. The stock has a market cap of $15.9 billion, P/E ratio of 17 and Total Debt/Equity ratio of 1.6. WM also had an EPS growth rate of -0.6% during the last five years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
