Are you a dividend investor searching for stocks with solid yields of 5%+ and greater? One smart area to search is among companies that can sustain their payouts with strong sources of profitability, matched by positive analyst recommendations. Today we screened for dividend stocks with these traits, 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.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
We first looked for stocks that have a high dividend yield (Div. Yield > 5%). We then screened for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(1-year operating margin>15%). From here, we then looked for companies that analysts rate as "Buy" (2 < mean recommendation < 3). We did not screen out any market caps or sectors.
Do you think these stocks should be trading higher? Use our list to help with your own analysis.
1) Williams Partners L.P. (WPZ)
Williams Partners L.P. has a Dividend Yield of 5.86%, a Payout Ratio of 83.00%, a Earnings Per Share Growth Rate of 38.59%, a Operating Profit Margin of 24.61%, and a Analysts' Rating of 1.90. The short interest was 1.06% as of 07/08/2012. Williams Partners L.P., an energy infrastructure company, focuses on connecting North America's hydrocarbon resource plays to growing markets for natural gas and natural gas liquids. It operates in two segments, Gas Pipeline and Midstream Gas & Liquids. The Gas Pipeline segment owns and operates a combined total of approximately 13,700 miles of pipelines.
2) Medallion Financial Corp. (TAXI)
Medallion Financial Corp. has a Dividend Yield of 7.75%, a Payout Ratio of 64.11%, a Earnings Per Share Growth Rate of 69.63%, a Operating Profit Margin of 26.86%, and a Analysts' Rating of 2.00. The short interest was 3.75% as of 07/08/2012. Medallion Financial Corp., through its subsidiaries, operates as a specialty finance company in the United States. The company engages in originating, acquiring, and servicing loans that finance taxicab medallions and various types of commercial businesses. It offers commercial loans to finance the purchase of the equipment and related assets necessary to open a new business, or the purchase or improvement of an existing business; asset-based loans to small businesses; and secured mezzanine loans to businesses in various industries, including manufacturing and various service providers.
3) THL Credit, Inc. (TCRD)
THL Credit, Inc. has a Dividend Yield of 9.08%, a Payout Ratio of 91.55%, a Earnings Per Share Growth Rate of 203.57%, a Operating Profit Margin of 56.13%, and a Analysts' Rating of 1.80. The short interest was 1.49% as of 07/08/2012. THL Credit, Inc. is a private equity and mezzanine firm specializing in mature, bridge, PIPES, industry consolidation, acquisition, recapitalization, change of control transactions, and growth capital investments in both sponsored and unsponsored middle-market companies. It provides junior debt and equity to both private and public companies. The firm also invests in privately negotiated subordinated debt securities such as warrants.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.