Are you a dividend investor searching for stocks with solid yields of 3% and greater? One great place to search is among large cap stocks that can reliably sustain their payouts due to their strong sources of profitability, matched with positive analyst ratings. Today we screened for stocks of this nature, and came up with a short but interesting list.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
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 large cap dividend stocks. From here, we then looked for companies that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(ROE [TTM]>30%). From here, we then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any sectors.
Do you think these large-cap stocks have strong operations? Please use our list to assist with your own analysis.
1) E. I. du Pont de Nemours and Company (DD)
|Industry:||Chemicals - Major Diversified|
E. I. du Pont de Nemours and Company has a Dividend Yield of 3.47%, a Payout Ratio of 43.57%, an Earnings Per Share Growth Rate of 12.30%, a Return on Equity of 34.70%, and an Analysts' Rating of 2.30. The short interest was 2.49% as of 07/06/2012. E. I. du Pont de Nemours and Company operates as a science and technology based company worldwide. Its Agriculture segment provides hybrid corn and soybean seeds, and grains under the Pioneer brand name; and herbicides, fungicides, and insecticides. The company's Electronics & Communications segment supplies materials and systems for photovoltaic products, consumer electronics, displays, and advanced printing.
2) McDonald's Corp. (MCD)
McDonald's Corp. has a Dividend Yield of 3.14%, a Payout Ratio of 48.32%, an Earnings Per Share Growth Rate of 15.03%, a Return on Equity of 38.20%, and an Analysts' Rating of 2.30. The short interest was 1.11% as of 07/06/2012. McDonald's Corporation, together with its subsidiaries, franchises and operates McDonald's restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. The company's restaurants offer hamburgers and cheeseburgers, Big Mac, Quarter Pounder with cheese, Filet-O-Fish, chicken sandwiches, chicken McNuggets, chicken selects, snack wraps, french fries, salads, shakes, desserts, sundaes, soft serve cones, pies, cookies, soft drinks, coffee, and other beverages, as well as full or limited breakfast menu. As of December 31, 2011, it operated 33,510 restaurants in 119 countries, including 27,075 franchised restaurants and 6,435 company operated restaurants. The company was founded in 1940 and is based in Oak Brook, Illinois.
3) GlaxoSmithKline plc (GSK)
|Industry:||Drug Manufacturers - Major|
GlaxoSmithKline plc has a Dividend Yield of 4.95%, a Payout Ratio of 74.85%, an Earnings Per Share Growth Rate of 223.80%, a Return on Equity of 56.72%, and an Analysts' Rating of 2.30. The short interest was 0.06% as of 07/06/2012. 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. It 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.
4) BHP Billiton Ltd. (BHP)
|Industry:||Industrial Metals & Minerals|
BHP Billiton Ltd. has a Dividend Yield of 3.32%, a Payout Ratio of 25.60%, an Earnings Per Share Growth Rate of 87.42%, a Return on Equity of 38.59%, and an Analysts' Rating of 2.20. The short interest was 0.51% as of 07/06/2012. BHP Billiton Ltd., together with its subsidiaries, operates as a diversified natural resources company worldwide. The company engages in the exploration, development, and production of oil and gas; mining and refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining of copper, silver, lead, zinc, molybdenum, uranium, gold, diamonds, and titanium minerals, as well as development of potash deposits. It also involves in the mining and production of nickel products, manganese ore, and manganese metal and alloys, as well as in the mining of iron ore, metallurgical coal, and thermal coal.
*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.