Are you a dividend investor, searching out companies with sustainable payouts? For ideas on where to look, we honed in on basic materials companies with considerable profits, backed by ratings of 'Buy' by analysts. We think you'll find our list rather interesting.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
We first looked for basic materials dividend stocks. We then looked for companies that have strong bottom line profitability (Net Margin [TTM]>10%)(ROE [TTM]>30%). We then screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We did not screen out any market caps.
Do you think these stocks will continue to see such strong profitability? Use our screened list as a starting point for your own analysis.
1) Legacy Reserves Lp (LGCY)
|Industry:||Oil & Gas Drilling & Exploration|
Legacy Reserves Lp has a Dividend Yield of 8.99% and Payout Ratio of 69.41% and Net Margin of 39.19% and Return on Equity of 35.93% and Analysts' Rating of 1.70. The short interest was 0.24% as of 06/01/2012. Legacy Reserves LP, an independent oil and natural gas limited partnership, engages in the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent, and Rocky Mountain regions of the United States. As of December 31, 2010, it owned interests in producing oil and natural gas properties in 370 fields in the Permian Basin, Texas Panhandle, Wyoming, Oklahoma, and several other states; operated 2,132 gross productive wells; and owned non-operated interests in 3,227 gross productive wells, as well as had proved reserves of approximately 52.8 million barrels of crude oil equivalent.
2) Alliance Resource Partners LP (ARLP)
|Industry:||Industrial Metals & Minerals|
Alliance Resource Partners LP has a Dividend Yield of 7.19% and Payout Ratio of 49.02% and Net Margin of 20.22% and Return on Equity of 32.88% and Analysts' Rating of 2.00. The short interest was 0.84% as of 06/01/2012. Alliance Resource Partners, L.P. engages in the production and marketing of coal primarily to utilities and industrial users in the United States.
3) Kronos Worldwide Inc. (KRO)
Kronos Worldwide Inc. has a Dividend Yield of 3.55% and Payout Ratio of 17.51% and Net Margin of 19.08% and Return on Equity of 43.64% and Analysts' Rating of 2.50. The short interest was 21.65% as of 06/01/2012. Kronos Worldwide, Inc. engages in the production and marketing of titanium dioxide pigments under the Kronos brand name primarily in North America and Europe. It produces titanium dioxide pigments in two crystalline forms, rutile and anatase to impart whiteness, brightness, opacity, and durability for products, such as coatings, plastics, papers fibers, and ceramics, as well as for various specialty products, including inks, food, and cosmetics. The company also offers ilmenite, a raw material used directly as a feedstock by sulfate-process titanium dioxide pigment plants; iron-based chemicals, which are co-products and processed co-products of the titanium dioxide pigment production process and used as treatment and conditioning agents for industrial effluents and municipal wastewater, as well as in the manufacture of iron pigments, cement, and agricultural products; and titanium oxychloride and titanyl sulfate, which are side-stream products from the production of titanium dioxide pigments.
4) Tesoro Logistics LP (TLLP)
|Industry:||Oil & Gas Pipelines|
Tesoro Logistics LP has a Dividend Yield of 4.79% and Payout Ratio of 49.70% and Net Margin of 44.53% and Return on Equity of 37.57% and Analysts' Rating of 1.60. The short interest was 0.11% as of 06/01/2012. Tesoro Logistics LP engages in the ownership, operation, development, and acquisition of crude oil and refined products logistics assets in the United States. The company is involved in the gathering, terminalling, transportation, and storage of crude oil and refined products. Its assets consist of a crude oil gathering system in the Bakken Shale/Williston Basin area of North Dakota and Montana; eight refined products terminals in the midwestern and western United States; a crude oil and refined products storage facility; and five related short-haul pipelines.
5) Alliance Holdings GP, L.P. (AHGP)
|Industry:||Nonmetallic Mineral Mining|
Alliance Holdings GP, L.P. has a Dividend Yield of 6.42% and Payout Ratio of 67.36% and Net Margin of 20.09% and Return on Equity of 56.48% and Analysts' Rating of 2.00. The short interest was 0.51% as of 06/01/2012. Alliance Holdings GP, L.P., through its subsidiaries, produces and markets coal primarily to utilities and industrial users in the United States. It produces a range of steam coal with varying sulfur and heat contents. The company operates nine underground mining complexes in Illinois, Indiana, Kentucky, Maryland, and West Virginia.
6) Cliffs Natural Resources Inc. (CLF)
|Industry:||Steel & Iron|
Cliffs Natural Resources Inc. has a Dividend Yield of 5.23% and Payout Ratio of 8.82% and Net Margin of 26.16% and Return on Equity of 30.53% and Analysts' Rating of 2.10. The short interest was 6.64% as of 06/01/2012. Cliffs Natural Resources Inc., a mining and natural resources company, engages in the production of iron ore pellets, fines and lump ore, and metallurgical coal. It operates five iron ore mines located in Michigan and Minnesota; five metallurgical coal mines located in West Virginia and Alabama; and one thermal coal mine located in West Virginia. The company also operates two iron ore mines in eastern Canada that primarily provide iron ore to steel producers in Asia; and two iron ore mining complexes in Western Australia.
*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.