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This list is meant to serve as a starting point for investors. A lot of data has been provided so it should be relatively easy for an investor to scroll down the list and decide if the stock warrants further attention. If you find the stock to be of interest, you can dig deeper and see if meets with your investment criteria. To help the novice investor we have put out this guideline which could prove to be useful in the selection process. "Our suggested guidelines when searching for new investment ideas. A lot of key ratios will be used in this article and it would be good for investors to get a handle on some of the more important key ratios listed below

The Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to.

Retention ratio is the amount of net income that is not paid out as dividends. In other words, it is the money the company retains that can be used to grow the business, etc. It is calculated by subtracting 1 from the dividend ratio.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa

payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders than they are making. This situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for some time. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever. If your tolerance for risk is low, look for similar companies with the same or higher yields, but with lower payout ratios.

Free cash flow yield is obtained by dividing free cash flow per share by the current price of each share. Generally lower ratios are associated with an unattractive investment and vice versa. Free cash flow takes into account capital expenditures and other ongoing costs associated with the day to day to functions of the business. In our view free cash flow yield is a better valuation metric then earnings yield because of the above factors.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardizing future earnings. Ideally the company should have a ratio of 1 or higher.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of one year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. For example if a company has an interest ratio of 11.8, this means that it covers interest expenses 11.8 times with operating profits.

Company: Teva Pharmaceuticals (NYSE:TEVA)

Basic overview

  1. Levered free cash flow = $2.7B
  2. Operating cash flow = $3.99B
  3. Percentage Held by Insiders = 7.1
  4. Short ratio = 0.6%
  5. 5 year sales growth = 16.6%
  6. Long term debt to equity = 0.44
  7. Relative Strength 52 weeks = 43
  8. Cash Flow 5-year Average = 3.74

Growth

  1. Net Income ($mil) 12/2011 = 2768
  2. Net Income ($mil) 12/2010 = 3339
  3. Net Income ($mil) 12/2009 = 2004
  4. Net Income Reported Quarterly ($mil) = 859
  5. EBITDA ($mil) 12/2011 = 4025
  6. EBITDA ($mil) 12/2010 = 3646
  7. EBITDA ($mil) 12/2009 = 3111
  8. Cash Flow ($/share) 12/2011 = 5.85
  9. Cash Flow ($/share) 12/2010 = 4.41
  10. Cash Flow ($/share) 12/2009 = 4.26
  11. Sales ($mil) 12/2011 = 18312
  12. Sales ($mil) 12/2010 = 16121
  13. Sales ($mil) 12/2009 = 13899
  14. Annual EPS before NRI 12/2007 = 2.38
  15. Annual EPS before NRI 12/2008 = 2.86
  16. Annual EPS before NRI 12/2009 = 3.37
  17. Annual EPS before NRI 12/2010 = 4.54
  18. Annual EPS before NRI 12/2011 = 4.97


(Click to enlarge)

Dividend history

  1. Dividend Yield = 2.00
  2. Dividend Yield 5 Year Average = 1.10
  3. Dividend 5 year Growth = 20.00

Dividend sustainability

  1. Payout Ratio = 0.24
  2. Payout Ratio 5 Year Average = 0.16

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 8.27
  2. 5 Year History EPS Growth = 21.08
  3. ROE 5 Year Average = 17.24
  4. Return on Investment = 15.89
  5. Debt/Total Cap 5 Year Average = 20.48
  6. Current Ratio = 1.1
  7. Current Ratio 5 Year Average = 1.52
  8. Quick Ratio = 0.5
  9. Cash Ratio = 0.23
  10. Interest Coverage = 14.10
  11. Retention rate =76%
  12. 5 year EPS growth rate =16%
  13. 5 year capital sending rate = 26.2%

Suggested strategy

Consider dividing your fund into two lots and deploying one at in the 34-36 ranges. Deploy the second lot if it spikes below 30 on low volume. Alternatively you can sell puts at strikes you would not mind owning the stock at. If the stock closes below the strike price, you could be assigned the shares. Your final price would be the strike price minus the premium you were paid. If the stock does not close below the strike price, you get to keep the premium and repeat the process again.

Company: Oracle Corp (NYSE:ORCL)

Brief Overview

  1. Levered free cash flow = $11.6B
  2. Profit Margin = 26.8%
  3. Operating Margin = 37.8%
  4. Quarterly Revenue Growth = 1.30%
  5. Quarterly Earnings Growth = 7.5%
  6. Operating Cash Flow = $13.7B
  7. Beta = 1.32
  8. Long term debt to equity ratio = 0.22
  9. Percentage Held by Institutions = 61.5%
  10. Short Percentage of Float = 1.00%
  11. 5 year sales growth rate = 15.85%

Growth

  1. Net Income ($mil) 12/2011 = 8547
  2. Net Income ($mil) 12/2010 = 6135
  3. Net Income ($mil) 12/2009 = 5593
  4. EBITDA ($mil) 12/2011 = 15015
  5. EBITDA ($mil) 12/2010 = 11268
  6. EBITDA ($mil) 12/2009 = 10440
  7. Cash Flow ($/share) 12/2011 = 2.7
  8. Cash Flow ($/share) 12/2010 = 2.06
  9. Cash Flow ($/share) 12/2009 = 1.81
  10. Sales ($mil) 12/2011 = 35622
  11. Sales ($mil) 12/2010 = 26820
  12. Sales ($mil) 12/2009 = 23252
  13. Annual EPS before NRI 12/2007 = 0.97
  14. Annual EPS before NRI 12/2008 = 1.26
  15. Annual EPS before NRI 12/2009 = 1.38
  16. Annual EPS before NRI 12/2010 = 1.59
  17. Annual EPS before NRI 12/2011 = 2.13


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Dividend history

  1. Dividend Yield = 0.9
  2. Dividend Yield 5 Year Average = 0.49
  3. Dividend 5 year Growth = 8.5

Dividend sustainability

  1. Payout Ratio = 0.12
  2. Payout Ratio 5 Year Average = 0.07

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 14.4
  2. 5 Year History EPS Growth = 18.97
  3. ROE 5 Year Average = 30.18
  4. Return on Investment = 20.7
  5. Debt/Total Cap 5 Year Average = 28.31
  6. Current Ratio = 3.20
  7. Current Ratio 5 Year Average = 2.32
  8. Quick Ratio = 3.00
  9. Cash Ratio = 2.27
  10. Interest Coverage Quarterly = 17.60
  11. Retention rate = 88%
  12. 5 year EPS growth rate = 17.61%

Company: Kinder Morgan Energy KMP

Brief Overview

  1. Levered free cash flow = -$2.03B
  2. Profit Margin = 13.8%
  3. Operating Margin = 23.8%
  4. Quarterly Revenue Growth = -3.6%
  5. Quarterly Earnings Growth = -39%
  6. Operating Cash Flow = $3.01B
  7. Beta = 0.38
  8. Long term debt to equity ratio = 1.82
  9. Percentage Held by Institutions = 20.00%
  10. Short Percentage of Float = 3.7%
  11. 5 year sales growth rate = -3.52%
  12. Relative Strength 52 weeks = 75
  13. Cash Flow 5-year Average = 9.4

Growth

  1. Net Income ($mil) 12/2011 = 1258
  2. Net Income ($mil) 12/2010 = 1316
  3. Net Income ($mil) 12/2009 = 1268
  4. EBITDA ($mil) 12/2011 = 2809
  5. EBITDA ($mil) 12/2010 = 2780
  6. EBITDA ($mil) 12/2009 = 2628
  7. Cash Flow ($/share) 12/2011 = 11.72
  8. Cash Flow ($/share) 12/2010 = 10.34
  9. Cash Flow ($/share) 12/2009 = 10.54
  10. Sales ($mil) 12/2011 = 8211
  11. Sales ($mil) 12/2010 = 8078
  12. Sales ($mil) 12/2009 = 7003
  13. Annual EPS before NRI 12/2007 = 1.74
  14. Annual EPS before NRI 12/2008 = 2.07
  15. Annual EPS before NRI 12/2009 = 1.31
  16. Annual EPS before NRI 12/2010 = 1.47
  17. Annual EPS before NRI 12/2011 = 1.75


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Dividend history

  1. Dividend Yield = 6.20
  2. Dividend Yield 5 Year Average = 6.80
  3. Dividend 5 year Growth = 7.00

Dividend sustainability

  1. Payout Ratio = 2.65
  2. Payout Ratio 5 Year Average = 2.66

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 5
  2. 5 Year History EPS Growth = -2.46
  3. ROE 5 Year Average = 22.35
  4. Current Ratio = 1.70
  5. Current Ratio 5 Year Average = 0.61
  6. Quick Ratio = 0.50
  7. Interest Coverage Quarterly = 3.70

Company: Johnson & Johns (NYSE:JNJ)

Brief Overview

  1. Levered free cash flow = $8.35B
  2. Profit Margin = 15.5%
  3. Operating Margin = 24.9%
  4. Quarterly Revenue Growth = -0.2%
  5. Quarterly Earnings Growth = 12.5%
  6. Operating Cash Flow = $14.7B
  7. Beta = 0.53
  8. Long term debt to equity ratio = 0.21
  9. Percentage Held by Institutions = 65.3%
  10. Short Percentage of Float = 10.7%
  11. Relative Strength 52 weeks = 59
  12. Cash Flow 5-year Average = 5.51

Growth

  1. Net Income ($mil) 12/2011 = 9672
  2. Net Income ($mil) 12/2010 = 13334
  3. Net Income ($mil) 12/2009 = 12266
  4. EBITDA ($mil) 12/2011 = 16090
  5. EBITDA ($mil) 12/2010 = 20341
  6. EBITDA ($mil) 12/2009 = 18980
  7. Cash Flow ($/share) 12/2011 = 6.23
  8. Cash Flow ($/share) 12/2010 = 5.91
  9. Cash Flow ($/share) 12/2009 = 5.68
  10. Sales ($mil) 12/2011 = 65030
  11. Sales ($mil) 12/2010 = 61587
  12. Sales ($mil) 12/2009 = 61897
  13. Annual EPS before NRI 12/2007 = 4.15
  14. Annual EPS before NRI 12/2008 = 4.55
  15. Annual EPS before NRI 12/2009 = 4.63
  16. Annual EPS before NRI 12/2010 = 4.76
  17. Annual EPS before NRI 12/2011 = 5


(Click to enlarge)

Dividend history

  1. Dividend Yield = 3.7
  2. Dividend Yield 5 Year Average = 3.10
  3. Dividend 5 year Growth = 8.2

Dividend sustainability

  1. Payout Ratio = 0.62
  2. Payout Ratio 5 Year Average = 0.43

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 6.57
  2. 5 Year History EPS Growth = 4.38
  3. ROE 5 Year Average = 26.32
  4. Current Ratio = 2.70
  5. Current Ratio 5 Year Average = 1.94
  6. Quick Ratio = 2.10
  7. Cash Ratio = 1.64
  8. Interest Coverage Quarterly = 22.70

Company: Enbridge Energy Partners (NYSE:EEP)

Basic overview

  1. Levered free cash flow = - $547M
  2. Operating cash flow = $1.04B
  3. Percentage Held by Insiders = 19.5%
  4. Short ratio = 1.8%
  5. 5 year sales growth = 3.85%
  6. Long term debt to equity = 1.25
  7. Relative Strength 52 weeks = 63
  8. Cash Flow 5-year Average = 3.14
  9. Quarterly earnings growth = - 15.5%

Growth

  1. Net Income ($mil) 12/2011 = 624
  2. Net Income ($mil) 12/2010 = -199
  3. Net Income ($mil) 12/2009 = 317
  4. Net Income Reported Quarterly ($mil) = 99
  5. EBITDA ($mil) 12/2011 = 1343
  6. EBITDA ($mil) 12/2010 = 456
  7. EBITDA ($mil) 12/2009 = 899
  8. Cash Flow ($/share) 12/2011 = 3.52
  9. Cash Flow ($/share) 12/2010 = 3.58
  10. Cash Flow ($/share) 12/2009 = 3.32
  11. Sales ($mil) 12/2011 = 9110
  12. Sales ($mil) 12/2010 = 7736
  13. Sales ($mil) 12/2009 = 5732
  14. Annual EPS before NRI 12/2007 = 1.39
  15. Annual EPS before NRI 12/2008 = 1.58
  16. Annual EPS before NRI 12/2009 = 1.38
  17. Annual EPS before NRI 12/2010 = 1.46
  18. Annual EPS before NRI 12/2011 = 1.39


(Click to enlarge)

Dividend history

  1. Dividend Yield = 7.10
  2. Dividend Yield 5 Year Average = 8.10
  3. Dividend 5 year Growth = 2.53

Dividend sustainability

  1. Payout Ratio = 1.14
  2. Payout Ratio 5 Year Average = 1.42

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 3
  2. 5 Year History EPS Growth = -0.96
  3. ROE 5 Year Average = 10.55
  4. Current Ratio = 0.70
  5. Current Ratio 5 Year Average = 0.93
  6. Quick Ratio = 0.70
  7. Cash Ratio = 0.32
  8. Interest Coverage = 3.00

Important facts investors should be aware in regards to investing in MLP's

Payout ratios are not that important when it comes to MLPS generally pay a majority of their cash flow as distributions. Payout ratios are calculated by dividing the dividend/distribution rate by the net income per share, and this is why the payout ratio for MLPs is often higher than 100%. The more important ratio to focus on is the cash flow per unit. If one focuses on the cash flow per unit, one will see that in most cases, it exceeds the distribution declared per unit.

MLPs are not taxed like regular corporations because they pay out a large portion of their income to partners (as an investor you are basically a partner and are allocated units instead of shares) usually through quarterly distributions. The burden is thus shifted to the partners who are taxed at their ordinary income rates. As ordinary income tax rates of investors are typically lower than the income tax assessed on corporations, this arrangement is advantageous to the MLPs and generally most investors.

MLPs issue a Schedule K-1 to their investors. Unrelated business income (UBI) above $1,000 is taxable in an IRA. This information will appear Box 20 in the schedule K-1. UBI is typically a very small number usually well below $1000 and in some cases negative. If the MLP pays out distributions in excess of the income it generates, the distribution is classified as a "return of capital" and tax deferred until you sell your units. For more information, on this topic investors can visit the National Association of Publicly Traded Partnerships.

Conclusion

The markets are still in a corrective phase so investors can use pullbacks to deploy money into new positions. We expect the markets to generally trend upwards until about August at which point they could potentially put in another multi month top.

Disclosure:

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

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.

Disclaimer: It is imperative that you do your due diligence and then determine if the above plays meets with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Source: An Interesting Array Of Dividend Plays To Consider For Your Portfolio