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Investors should not focus on the yield factor only as there are many stocks with high yields whose performance has been anything but stellar. In fact, in some cases even with the yield the total rate of return has been negative for the past 3-5 years. Investors should look at the robustness of the company, the dividend growth rate, the sustainability of the dividend and finally one should take a look at the company's dividend history. Companies with stellar records will do everything possible to avoid cutting the dividend in order to maintain this record. For example, Chesapeake Energy (NYSE:CHK) meets with most of these requirements.

  • Net income has been increasing from 2009 to 2011.
  • Cash flow per share has increased from $5.07 in 2009 to $6.11 in 2011.
  • Sales increased from $7.7 billion in 2009 to $11.6 billion in 2011.
  • It has a decent five year dividend growth rate of 5.12%.
  • It has a low payout ratio of 16%.
  • A decent five year average ROE of 16%.
  • A projected 3-5 year EPS growth rate of 8.44%.
  • Projected year over year growth rate for 2013 of 200%.
  • A 5 year sales growth rate of 8%.
  • A strong quarterly revenue growth rate of 50%.
  • The percentage short of the float 11.8% and this makes it a pretty good candidate for a short squeeze.
  • A good interest coverage ratio of 16.

Company: Chesapeake Energy (CHK)

Basic Key ratios

  1. Percentage Held by Insiders = 0.65
  2. Relative Strength 52 weeks = 19
  3. Dividend 5-year Growth = 5.12
  4. Cash Flow 5-year Average = 6.24
  5. Dividend Yield 5-Year Average = 1.14

Growth

  1. Net Income ($mil) 12/2011 = 1742
  2. Net Income ($mil) 12/2010 = 1774
  3. Net Income ($mil) 12/2009 = -5830
  4. Net Income Reported Quarterly ($mil) = -28
  1. EBITDA ($mil) 12/2011 = 4847
  2. EBITDA ($mil) 12/2010 = 4595
  3. EBITDA ($mil) 12/2009 = -7481
  4. Cash Flow ($/share) 12/2011 = 6.11
  5. Cash Flow ($/share) 12/2010 = 5.68
  6. Cash Flow ($/share) 12/2009 = 5.07
  1. Sales ($mil) 12/2011 = 11635
  2. Sales ($mil) 12/2010 = 9366
  3. Sales ($mil) 12/2009 = 7702
  1. Annual EPS before NRI 12/2007 = 3.23
  2. Annual EPS before NRI 12/2008 = 3.56
  3. Annual EPS before NRI 12/2009 = 2.55
  4. Annual EPS before NRI 12/2010 = 2.95
  5. Annual EPS before NRI 12/2011 = 2.8

Dividend history

  1. Dividend Yield = 2.3
  2. Dividend Yield 5 Year Average 12/2011 = 1.14
  3. Dividend 5 year Growth 12/2011 = 5.12

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.16
  2. Payout Ratio 5 Year Average 12/2011 = 0.1

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 8.44
  2. 5 Year History EPS Growth 12/2011 = -5.28
  3. ROE 5 Year Average 12/2011 = 16.06
  4. Return on Investment 12/2011 = 6.2
  5. Current Ratio 12/2011 = 0.59
  6. Current Ratio 5 Year Average = 0.75
  7. Quick Ratio = 0.45
  8. Cash Ratio = 0.1
  9. Interest Coverage = 16

Company: Duke Energy Corp (NYSE:DUK)

Basic Key ratios

  1. Number of Institutional Sellers 12 Weeks = 5
  2. Relative Strength 52 weeks = 82
  3. Dividend 5-year Growth = 3.47
  4. Cash Flow 5-year Average = 2.85
  5. Dividend Yield 5-Year Average = 5.37

Growth

  1. Net Income ($mil) 12/2011 = 1706
  2. Net Income ($mil) 12/2010 = 1320
  3. Net Income ($mil) 12/2009 = 1075
  4. Net Income Reported Quarterly ($mil) = 295
  1. EBITDA ($mil) 12/2011 = 5350
  2. EBITDA ($mil) 12/2010 = 5044
  3. EBITDA ($mil) 12/2009 = 4428
  1. Cash Flow ($/share) 12/2011 = 2.98
  2. Cash Flow ($/share) 12/2010 = 2.93
  3. Cash Flow ($/share) 12/2009 = 2.63
  1. Sales ($mil) 12/2011 = 14529
  2. Sales ($mil) 12/2010 = 14272
  3. Sales ($mil) 12/2009 = 12731
  1. Annual EPS before NRI 12/2007 = 1.25
  2. Annual EPS before NRI 12/2008 = 1.21
  3. Annual EPS before NRI 12/2009 = 1.22
  4. Annual EPS before NRI 12/2010 = 1.43
  5. Annual EPS before NRI 12/2011 = 1.46

Dividend history

  1. Dividend Yield = 4.6
  2. Dividend Yield 5 Year Average 12/2011 = 5.37
  3. Dividend 5 year Growth 12/2011 = 3.47

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.69
  2. Payout Ratio 5 Year Average 12/2011 = 0.7
  3. Change in Payout Ratio = -0.01

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 4.67
  2. 5 Year History EPS Growth 12/2011 = 2.08
  3. ROE 5 Year Average 12/2011 = 8.53
  4. Current Ratio 12/2011 = 1.38
  5. Current Ratio 5 Year Average = 1.26
  6. Quick Ratio = 0.96
  7. Cash Ratio = 0.61
  8. Interest Coverage Quarterly = 2.79

Company: Potash Corp. of Saskatchewan, Inc (NYSE:POT)

Levered free cash flow= $ 61.2 million

Basic Key ratios

  1. Relative Strength 52 weeks = 39
  2. Dividend 5-year Growth = 20.01
  3. Cash Flow 5-year Average = 2.32
  4. Dividend Yield 5-Year Average = 0.4
  5. Profit margin 36%
  6. Operating margin 45%
  7. A 5 year sales growth of 10.2%,
  8. A long term debt to equity ratio of 41%

Growth

  1. Net Income ($mil) 12/2011 = 3081
  2. Net Income ($mil) 12/2010 = 1775
  3. Net Income ($mil) 12/2009 = 981
  4. Net Income Reported Quarterly ($mil) = 491
  1. EBITDA ($mil) 12/2011 = 4787
  2. EBITDA ($mil) 12/2010 = 3043
  3. EBITDA ($mil) 12/2009 = 1503
  1. Cash Flow ($/share) 12/2011 = 4.16
  2. Cash Flow ($/share) 12/2010 = 2.58
  3. Cash Flow ($/share) 12/2009 = 1.46
  1. Sales ($mil) 12/2011 = 8715
  2. Sales ($mil) 12/2010 = 6539
  3. Sales ($mil) 12/2009 = 3977
  1. Annual EPS before NRI 12/2007 = 1.13
  2. Annual EPS before NRI 12/2008 = 3.67
  3. Annual EPS before NRI 12/2009 = 1.08
  4. Annual EPS before NRI 12/2010 = 2.04
  5. Annual EPS before NRI 12/2011 = 3.51

Dividend history

  1. Dividend Yield = 1.4
  2. Dividend Yield 5 Year Average 12/2011 = 0.4
  3. Dividend 5 year Growth 12/2011 = 20.01

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.09
  2. Payout Ratio 5 Year Average 12/2011 = 0.08

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 12.6
  2. 5 Year History EPS Growth 12/2011 = 18.88
  3. ROE 5 Year Average 12/2011 = 33.28
  4. Return on Investment 12/2011 = 24.64
  5. Debt/Total Cap 5 Year Average 12/2011 = 28.56
  1. Current Ratio 12/2011 = 1.05
  2. Current Ratio 5 Year Average = 1.25
  3. Quick Ratio = 0.76
  4. Interest Coverage Quarterly = 10.21

Conclusion

The markets are still in a corrective mode, and we believe that we will need to see one more selling climax before a bottom is in place. In the interim, some sort of relief rally could take hold as they are extremely oversold. Long-term investors can use strong pullbacks to slowly start deploying money into long-term investments. A great way to get into a stock at a price of your choosing is to sell puts at strikes you would not mind owning the stock at. Investors looking for other investment ideas might find these articles to be of interest: Alcatel-Lucent: A Chance To Earn 7% Plus A Lower Entry price and American Capital Agency: Significantly Boost Your Yield with a simple strategy.

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.

Source: Chesapeake Energy 1 Of 3 Long-Term Prospects To Consider

Additional disclosure: EPS and Price vs. industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com.