Do you prefer investing in stocks with high dividend yields over 5%? Today, we focus on companies with sustainable yields, backed by strong earnings trends. We only screened for those with 'Buy' or better analyst ratings. We hope you find our list interesting.
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue, very few can make very large profits with little investment.
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.
We first looked for large cap stocks that have a high dividend yield (Div. Yield > 5%). From here, we then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). Next, we then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(Net Margin [TTM]>10%). We did not screen out any sectors.
Do you think these large-cap stocks should be trading higher? Use this list as a starting-off point for your own analysis.
1) Lorillard, Inc. (NYSE:LO)
Lorillard, Inc. has a Dividend Yield of 5.06%, a Payout Ratio of 67.74%, an Analysts' Rating of 2.50, a Return on Assets of 31.44%, and a Net Margin of 16.89%. The short interest was 3.26% as of 06/08/2012. Lorillard, Inc., through its subsidiaries, manufactures and sells cigarettes in the United States. It markets approximately 43 product offerings in various brand names, including Newport, Kent, True, Maverick, and Old Gold. The company sells its products primarily to wholesale distributors, who in turn service retail outlets, chain store organizations, and government agencies.
2) Mobile Telesystems OJSC (NYSE:MBT)
Mobile Telesystems OJSC has a Dividend Yield of 5.83%, an Analysts' Rating of 1.70, a Return on Assets of 11.04%, and a Net Margin of 13.91%. The payout ratio could not be determined. The short interest was 0.81% as of 06/08/2012. Mobile TeleSystems OJSC, together with its subsidiaries, provides telecommunications services, primarily in the Russian Federation, Ukraine, Uzbekistan, Armenia, and Belarus.
The company provides a range of mobile and fixed line voice and data telecommunications services, including transmission, broadband, pay-TV, and various value-added services; and sells equipment and accessories. It also offers network access services, including mobile cellular voice and data communication services; automatic roaming services; GPRS and Internet access services; and 3G technology.
3) GlaxoSmithKline plc (NYSE:GSK)
|Industry:||Drug Manufacturers - Major|
GlaxoSmithKline plc has a Dividend Yield of 5.14%, a Payout Ratio of 74.85%, an Analysts' Rating of 2.30, a Return on Assets of 12.63%, and a Net Margin of 19.18%. The short interest was 0.17% as of 06/08/2012. GlaxoSmithKline plc, together with its subsidiaries, engages in the discovery, development, manufacture, and marketing of pharmaceutical products, over the counter (OTC) medicines, and health-related consumer products worldwide.
The company offers pharmaceutical products in various therapeutic areas comprising respiratory, HIV, central nervous system, cardiovascular and urogenital, metabolic, anti-bacterial, oncology and emesis, vaccines, and dermatologicals. The company provides prescription medicines to treat a range of conditions, including infections, depression, skin conditions, asthma, heart and circulatory disease, and cancer.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.