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In the learning to fish series, investors are provided with suggested guidelines for choosing a potential candidate and one candidate is selected as our play of choice. We provide reasons for this choice and in doing so hope to impart some understanding to those who are new to the field of dividend investing. The suggested guidelines can be accessed here "Our suggested guidelines when searching for new investment ideas." These are not absolute rules; they are just suggestions and there are always exceptions to the rule. The goal is to try to satisfy as many of them as possible.

Reasons to be bullish on Petroleo Brasileiro S.A. (NYSE:PBR):

  • Net income rose from $15.3 billion in 2009 to $20.1 billion in 2011.
  • Sales rose from 92.8 billion in 2009 to $141.7 billion in 2011.
  • EBITDA rose from $29.4 billion in 2009 to $37.2 billion in 2011.
  • A low payout ratio of 32%
  • A great retention ratio of 68%
  • A projected 3-5 year EPS growth rate of 5.9%
  • A five-year ROE average of 22.04%
  • A good current ratio of 1.92
  • A long-term debt to equity ratio of 0.43
  • A good interest coverage ratio of 16.7
  • A five-year sales growth rate of 11.67%
  • A projected year over year growth rate of 21% for 2013
  • A quarterly revenue growth rate of 14.7%
  • A good free cash flow yield of 8.53%
  • A five-year cash flow average of 7.05
  • $100K invested for 10 years would have grown to $698K

Company: Petroleo Brasileiro S.A.

Levered Free Cash Flow = -15.95B

Brief Overview

  1. Relative Strength 52 weeks = 23
  2. Cash Flow 5-year Average = 7.05
  3. Profit Margin = 12.18%
  4. Operating Margin = 17.06%
  5. Quarterly Revenue Growth = 14.7%
  6. Quarterly Earnings Growth = -20.9%
  7. Operating Cash Flow = 31.81B
  8. Beta = 1.71

Growth

  1. Net Income ($mil) 12/2011 = 20121
  2. Net Income ($mil) 12/2010 = 20055
  3. Net Income ($mil) 12/2009 = 15308
  4. Net Income Reported Quarterly ($mil) = 5212
  5. EBITDA ($mil) 12/2011 = 37259
  6. EBITDA ($mil) 12/2010 = 35582
  7. EBITDA ($mil) 12/2009 = 29409
  8. Cash Flow ($/share) 12/2011 = 8.03
  9. Cash Flow ($/share) 12/2010 = 7.63
  10. Cash Flow ($/share) 12/2009 = 8.61
  11. Sales ($mil) 12/2011 = 141798
  12. Sales ($mil) 12/2010 = 121779
  13. Sales ($mil) 12/2009 = 92817
  14. Annual EPS before NRI 12/2007 = 3
  15. Annual EPS before NRI 12/2008 = 4.32
  16. Annual EPS before NRI 12/2009 = 3.36
  17. Annual EPS before NRI 12/2010 = 4.08
  18. Annual EPS before NRI 12/2011 = 2.96

Dividend history

  1. Dividend Yield = 0.58
  2. Dividend Yield 5 Year Average = 0.46
  3. Dividend 5 year Growth = 6.27

Dividend sustainability

  1. Payout Ratio = 0.32
  2. Payout Ratio 5 Year Average = 0.05

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 5.97
  2. ROE 5 Year Average = 22.04
  3. Current Ratio = 1.92
  4. Current Ratio 5 Year Average = 1.48
  5. Quick Ratio = 1.36
  6. Cash Ratio = 0.85
  7. Interest Coverage = 16.7

Interesting companies

For investors looking for other ideas detailed data has been provided on two additional companies. Our latest article could provide additional ideas: Sirius XM: Fetch Yourself A 20% Yield In 8 Months Or a lower entry price.

Company : Navios Maritime Partners LP (NYSE:NMM)

Levered Free Cash Flow = -5.89M

Brief Overview

  1. Percentage Held by Insiders = 9.23%
  2. 5. Relative Strength 52 weeks = 38
  3. 6. Cash Flow 5-year Average = 2.4
  4. 7. Profit Margin = 34.18%
  5. 8. Operating Margin = 40.94%
  6. 9. Quarterly Revenue Growth = 12.1%
  7. 10. Quarterly Earnings Growth = 2%
  8. 11. Operating Cash Flow = 133.98M
  9. 12. Beta = 1.50
  10. 13. Percentage Held by Institutions = 24.6%

Growth

  1. Net Income ($mil) 12/2011 = 65
  2. Net Income ($mil) 12/2010 = 61
  3. Net Income ($mil) 12/2009 = 34
  4. Net Income Reported Quarterly ($mil) = 17
  5. EBITDA ($mil) 12/2011 = 139
  6. EBITDA ($mil) 12/2010 = 109
  7. EBITDA ($mil) 12/2009 = 59
  8. Cash Flow ($/share) 12/2011 = 2.86
  9. Cash Flow ($/share) 12/2010 = 2.49
  10. Cash Flow ($/share) 12/2009 = 2.24
  11. Sales ($mil) 12/2011 = 187
  12. Sales ($mil) 12/2010 = 143
  13. Sales ($mil) 12/2009 = 93
  14. Annual EPS before NRI 12/2007 = 0.15
  15. Annual EPS before NRI 12/2008 = 1.56
  16. Annual EPS before NRI 12/2009 = 1.66
  17. Annual EPS before NRI 12/2010 = 1.51
  18. Annual EPS before NRI 12/2011 = 1.4

Dividend history

  1. Dividend Yield = 13.11
  2. Dividend Yield 5 Year Average = 11.33
  3. Annual Dividend 12/2011 = 1.74

Dividend sustainability

  1. Payout Ratio = 4.73

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 5
  2. ROE 5 Year Average 12/2012 = 24.89
  3. Current Ratio 12/2011 = 1.19
  4. Current Ratio 5 Year Average = 2.26
  5. Quick Ratio = 1.12
  6. Cash Ratio = 1.04
  7. Interest Coverage Quarterly = 7.03

Company : Ternium SA (NYSE:TX)

Levered Free Cash Flow = 228.45M

Brief Overview

  1. Relative Strength 52 weeks = 28
  2. Cash Flow 5-year Average = 5.57
  3. Profit Margin = 5.09%
  4. Operating Margin = 13.93%
  5. Quarterly Revenue Growth = 2.2%
  6. Quarterly Earnings Growth = -22%
  7. Operating Cash Flow = 691.89M
  8. Beta = 2.05
  9. Percentage Held by Institutions
  10. Short Percentage of Float

Growth

  1. Net Income ($mil) 12/2011 = 650
  2. Net Income ($mil) 12/2010 = 780
  3. Net Income ($mil) 12/2009 = 767
  4. Net Income Reported Quarterly ($mil) = 160
  5. EBITDA ($mil) 12/2011 = 1472
  6. EBITDA ($mil) 12/2010 = 1642
  7. EBITDA ($mil) 12/2009 = 921
  8. Cash Flow ($/share) 12/2011 = 6.27
  9. Cash Flow ($/share) 12/2010 = 5.8
  10. Cash Flow ($/share) 12/2009 = 3.61
  11. Sales ($mil) 12/2011 = 9157
  12. Sales ($mil) 12/2010 = 7382
  13. Sales ($mil) 12/2009 = 4959
  14. Annual EPS before NRI 12/2007 = 0.39
  15. Annual EPS before NRI 12/2008 = 2.93
  16. Annual EPS before NRI 12/2009 = 1.58
  17. Annual EPS before NRI 12/2010 = 3.1
  18. Annual EPS before NRI 12/2011 = 3.42

Dividend history

  1. Dividend Yield = 4
  2. Dividend Yield 5 Year Average 12/2011 = 3.49
  3. Annual Dividend 12/2011 = 1.5
  4. Dividend 5 year Growth = N/A

Dividend sustainability

  1. Payout Ratio = 0.32
  2. Payout Ratio 5 Year Average = 0.26

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 2
  2. ROE 5 Year Average 12/2012 = 12.66
  3. 8. Current Ratio 12/2011 = 2.01
  4. 9. Current Ratio 5 Year Average = 3
  5. Quick Ratio = 1.74
  6. Cash Ratio = 1.37
  7. A retention ratio of 68%
  8. Interest Coverage Quarterly = 8.28

Conclusion

Long-term investors can use strong pullbacks to open up positions in stocks they would not mind owning for the long haul. 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 willing to take on a bit more risk might find this article to be of interest: Alpha Natural Resources Vs. Arch Coal: Is There A Clear winner?

Sources: 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. Consensus estimate analysis table sourced from reuters.com. Ycharts data sourced from ycharts.com. Growth and earnings estimates sourced from dailyfinance.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.