As a dividend investor, are you in search of financial stocks with solid yields of 5% or greater? One way to target well run financial companies is to look for ones that not only have strong track records of profitability, but that industry analysts also favor highly and have stamped with 'Buy' recommendations. We ran a screen for financial companies in this vein, and we came up with a short and interesting list.
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.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
We first looked for financial stocks that have a high dividend yield (Div. Yield > 5%). Next, we then screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). Next, we then screened for businesses with strong profit margins (1-year operating margin>15%)(Net Margin [TTM] >10%). We did not screen out any market caps.
Do you think these stocks will break through to new highs? Please use our list to assist with your own analysis.
1) Ares Capital Corporation (ARCC)
Ares Capital Corporation has a Dividend Yield of 9.19%, a Payout Ratio of 99.35%, a Analysts' Rating of 1.80, a Operating Profit Margin of 46.41%, and a Net Margin of 45.19%. The short interest was 1.75% as of 07/08/2012. Ares Capital Corporation is a private equity firm specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.
2) Granite Real Estate Inc. (GRP)
Granite Real Estate Inc. has a Dividend Yield of 5.65%, a Payout Ratio of 87.58%, a Analysts' Rating of 2.00, a Operating Profit Margin of 33.51%, and a Net Margin of 35.20%. The short interest was 0.11% as of 07/08/2012. Granite Real Estate Inc. engages in the acquisition, development, construction, ownership, leasing, and management of industrial rental portfolio of properties. Its properties consist of heavy industrial manufacturing facilities, light industrial properties, corporate offices, product development and engineering centers, and test facilities. As of March 31, 2012, Granite Real Estate Inc.
3) THL Credit, Inc. (TCRD)
THL Credit, Inc. has a Dividend Yield of 9.08%, a Payout Ratio of 91.55%, a Analysts' Rating of 1.80, a Operating Profit Margin of 56.13%, and a Net Margin of 60.72%. 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.