As a dividend investor, are you looking for stocks with reliable yields of 3% and greater? One great place to search is among large caps that can consistently sustain their payouts due to considerable profitability. It's even better when those profitable large caps have received positive analyst ratings, meaning now might be the time to buy. Today we screened for stocks of this nature, and came up with a compelling 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.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
We first looked for large cap dividend stocks. We then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). From here, we then looked for companies with strong profit margins (1-year operating margin>15%)(ROA [TTM]>10%). We did not screen out any sectors.
Do you think these large-cap stocks will trade at a higher valuation? Use this list as a starting-off point for your own analysis.
1) Freeport-McMoRan Copper & Gold Inc. (FCX)
Freeport-McMoRan Copper & Gold Inc. has a Dividend Yield of 3.78%, a Payout Ratio of 38.80%, a Analysts' Rating of 1.80, a Operating Profit Margin of 38.98%, and a Return on Assets of 15.25%. The short interest was 2.59% as of 07/10/2012. Freeport-McMoRan Copper & Gold Inc. engages in the exploration, mining, and production of mineral resources. The company primarily explores for copper, gold, molybdenum, cobalt hydroxide, silver, and other metals, such as rhenium and magnetite. It holds interests in various mines located in the Grasberg minerals district in Indonesia; Morenci minerals district in North America; South America; and Tenke Fungurume minerals district in the Democratic Republic of Congo.
2) Vale S.A. (VALE)
|Industry:||Industrial Metals & Minerals|
Vale S.A. has a Dividend Yield of 3.03%, a Payout Ratio of 44.93%, a Analysts' Rating of 2.30, a Operating Profit Margin of 45.74%, and a Return on Assets of 13.81%. The short interest was 1.72% as of 07/10/2012. Vale S.A. engages in the exploration, production, and sale of basic metals in Brazil and internationally. The company is also involved in fertilizers, logistics, and steel businesses. Its Bulk Material segment engages in the extraction of iron ore and pellet production, as well as operation of Brazilian northern and southern transportation systems, including railroads, ports, and terminals related to mining operations.
3) BHP Billiton plc (BBL)
|Industry:||Industrial Metals & Minerals|
BHP Billiton plc has a Dividend Yield of 3.94%, a Payout Ratio of 25.60%, a Analysts' Rating of 2.50, a Operating Profit Margin of 43.96%, and a Return on Assets of 20.97%. The short interest was 0.07% as of 07/10/2012. BHP Billiton Plc, together with its subsidiaries, operates as a diversified natural resources company. The company engages in the exploration, development, production, and marketing of oil and gas properties. It also involves in mining of bauxite, refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining of copper, silver, lead, zinc, molybdenum, uranium, gold, diamond, titanium, nickel, iron ore, metallurgical coal, and thermal or steaming coal.
4) Statoil ASA (STO)
|Industry:||Major Integrated Oil & Gas|
Statoil ASA has a Dividend Yield of 4.59%, a Payout Ratio of 25.53%, a Analysts' Rating of 2.40, a Operating Profit Margin of 30.68%, and a Return on Assets of 10.77%. The short interest was 0.36% as of 07/10/2012. Statoil ASA, an integrated energy company, engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products in Norway and internationally. The company is involved in the exploration, development, and production of crude oil and natural gas, as well as extraction of natural gas liquids. It also transports and markets natural gas and natural gas products; and engages in petroleum refining operations, as well as marketing crude oil and refined petroleum products.
5) Analog Devices Inc. (ADI)
|Industry:||Semiconductor - Integrated Circuits|
Analog Devices Inc. has a Dividend Yield of 3.32%, a Payout Ratio of 44.39%, a Analysts' Rating of 2.10, a Operating Profit Margin of 32.55%, and a Return on Assets of 13.35%. The short interest was 1.91% as of 07/10/2012. Analog Devices, Inc. engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICS) used in industrial, automotive, consumer, and communication applications. The company's signal processing products involve in converting, conditioning, and processing real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals. Its product range includes data converters, amplifiers and linear products, radio frequency ICs, power management products, sensors based on micro-electro mechanical systems technology and other sensors, and processing products.
6) Lorillard, Inc. (LO)
Lorillard, Inc. has a Dividend Yield of 4.56%, a Payout Ratio of 67.74%, a Analysts' Rating of 2.50, a Operating Profit Margin of 28.86%, and a Return on Assets of 31.44%. The short interest was 3.60% as of 07/10/2012. Lorillard, Inc., through its subsidiaries, manufactures and sells cigarettes in the United States. It markets approximately 43 product offerings in various brand names, including Newport, Kent, True, Maverick, and Old Gold. The company sells its products primarily to wholesale distributors, who in turn service retail outlets, chain store organizations, and government agencies.
*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.