For dividend investors, high yields are always nice, but they're even better when they're coming from a company that can keep them up over time. Reasonable payout ratios are part of dividend sustainability, but so is having plenty of cash in the bank. Today we focus on dividend stocks offering decent yields for all the right reasons, pay special attention to those companies that have received positive ratings from analysts. We think you'll find our list of companies pretty interesting.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for dividend stocks. We then looked for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We next screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps or sectors.
Do you think these stocks have strong enough fundamentals to move higher? Please use our list to assist with your own analysis.
1) Universal Corp. (UVV)
|Industry:||Tobacco Products, Other|
Universal Corp. has a Dividend Yield of 4.18%, a Payout Ratio of 58.22%, a Analysts' Rating of 2.00, a Current Ratio of 4.31, and a Quick Ratio of 2.43. The short interest was 13.61% as of 07/02/2012. Universal Corporation, through its subsidiaries, operates as a leaf tobacco merchant and processor worldwide. It engages in selecting, procuring, processing, packing, storing, shipping, and financing leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. The company processes and/or sells flue-cured and burley tobaccos, dark air-cured tobaccos, and oriental tobaccos. Flue-cured, burley, and oriental tobaccos are principally used in the manufacture of cigarettes; and dark air-cured tobaccos are used primarily in the manufacture of cigars, pipe tobacco, and smokeless tobacco products.
2) Cinemark Holdings Inc. (CNK)
|Industry:||Movie Production, Theaters|
Cinemark Holdings Inc. has a Dividend Yield of 3.66%, a Payout Ratio of 65.71%, a Analysts' Rating of 2.00, a Current Ratio of 2.09, and a Quick Ratio of 2.06. The short interest was 6.18% as of 07/02/2012. Cinemark Holdings, Inc., together with its subsidiaries, engages in motion picture exhibition business. As of March 31, 2012, it operated 459 theatres with 5,181 screens in the United States, Brazil, Mexico, Argentina, and Latin America. The company is headquartered in Plano, Texas.
3) Johnson & Johnson (JNJ)
|Industry:||Drug Manufacturers - Major|
Johnson & Johnson has a Dividend Yield of 3.59%, a Payout Ratio of 61.72%, a Analysts' Rating of 2.00, a Current Ratio of 2.69, and a Quick Ratio of 2.37. The short interest was 9.54% as of 07/02/2012. Johnson & Johnson engages in the research, development, manufacture, and sale of various products in the health care field worldwide. Its Consumer segment offers products for use in the baby care, skin care, oral care, wound care, and women's health fields, as well as nutritional and over-the-counter pharmaceutical products, and wellness and prevention platforms under JOHNSON'S, AVEENO, CLEAN & CLEAR, NEUTROGENA, RoC, LUBRIDERM, DABAO, VENDME, LISTERINE, REACH, BAND-AID, and NEOSPORIN.
4) Consolidated Water Co. Ltd. (CWCO)
Consolidated Water Co. Ltd. has a Dividend Yield of 3.60%, a Payout Ratio of 67.69%, a Analysts' Rating of 2.00, a Current Ratio of 4.19, and a Quick Ratio of 4.08. The short interest was 4.08% as of 07/02/2012. Consolidated Water Co. Ltd., through its subsidiaries, develops and operates seawater desalination plants and water distribution systems. It uses reverse osmosis technology to produce fresh water from seawater. The company operates approximately 14 reverse osmosis desalination plants.
5) Maxim Integrated Products Inc. (MXIM)
|Industry:||Semiconductor - Broad Line|
Maxim Integrated Products Inc. has a Dividend Yield of 3.45%, a Payout Ratio of 68.88%, a Analysts' Rating of 2.30, a Current Ratio of 3.74, and a Quick Ratio of 3.24. The short interest was 0.68% as of 07/02/2012. Maxim Integrated Products, Inc. engages in designing, developing, manufacturing, and marketing various linear and mixed-signal integrated circuits worldwide. The company also provides various high-frequency process technologies and capabilities for use in custom designs. It primarily serves industrial, communications, consumer, and computing markets.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Google Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.