Are you a dividend investor searching for stocks with moderate to high yields? One great place to search is among those that can sustain their payouts over time, due to strong sources of profitability. Even better are stocks that have built up strong cash reserves, since it's cash that will support a company during lulls in demand. Today we screened for stocks of this nature, and came up with a short but interesting list.
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.
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 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 next screened for businesses that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(1-year fiscal EPS growth rate>10%). We next screened for businesses that have strong liquidity (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? Use our list to help with your own analysis.
1) CVR Partners, LP (UAN)
CVR Partners, LP has a Dividend Yield of 8.64%, a Payout Ratio of 78.40%, a Return on Equity of 60.52%, a Earnings Per Share Growth Rate of 297.27%, a Current Ratio of 4.95, and a Quick Ratio of 4.52. The short interest was 1.28% as of 07/11/2012. CVR Partners, LP engages in the production, distribution, and marketing of nitrogen fertilizers in North America. Its nitrogen fertilizer products include ammonia and urea ammonium nitrate. The company was founded in 2007 and is based in Sugar Land, Texas.
2) Linear Technology Corp. (LLTC)
|Industry:||Semiconductor - Specialized|
Linear Technology Corp. has a Dividend Yield of 3.32%, a Payout Ratio of 48.85%, a Return on Equity of 84.33%, a Earnings Per Share Growth Rate of 58.03%, a Current Ratio of 9.18, and a Quick Ratio of 8.66. The short interest was 2.82% as of 07/11/2012. Linear Technology Corporation, together with its subsidiaries, designs, manufactures, and markets various analog integrated circuits worldwide. The company produces power management, data conversion, signal conditioning, RF and interface ICs, and Module subsystems. Its products comprise amplifiers, high speed amplifiers, voltage regulators, voltage references, interface, data converters, radio frequency circuits, power over Ethernet controllers, Module power products, and single chain Module products, as well as other liner circuits. The company's product applications include telecommunications, cellular telephones, networking products, tablet, notebook, and desktop computers; computer peripherals, video/multimedia, industrial instrumentation, and security monitoring devices; consumer products, such as digital cameras and global positioning systems; complex medical devices, automotive electronics, factory automation, and process control; and military, space, and other harsh environment systems.
3) Southern Copper Corp. (SCCO)
Southern Copper Corp. has a Dividend Yield of 6.52%, a Payout Ratio of 82.37%, a Return on Equity of 58.93%, a Earnings Per Share Growth Rate of 51.07%, a Current Ratio of 3.56, and a Quick Ratio of 2.92. The short interest was 6.59% as of 07/11/2012. Southern Copper Corporation engages in mining, exploring, producing, smelting, and refining copper and other minerals in Peru, Mexico, and Chile. It is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce anode copper; and refining of anode copper to produce copper cathodes, as well as refined silver. The company operates Toquepala and Cuajone mines in the Andes Mountains located to the southeast of the city of Lima, Peru, as well as a smelter and refinery in the coastal city of Ilo, Peru. It also operates La Caridad and Buenavista copper mines, and smelting and refining plants in Mexico.
4) Computer Programs & Systems Inc. (CPSI)
|Industry:||Healthcare Information Services|
Computer Programs & Systems Inc. has a Dividend Yield of 3.42%, a Payout Ratio of 65.25%, a Return on Equity of 49.14%, a Earnings Per Share Growth Rate of 36.98%, a Current Ratio of 2.84, and a Quick Ratio of 2.74. The short interest was 7.80% as of 07/11/2012. Computer Programs and Systems, Inc., a healthcare information technology company, designs, develops, markets, installs, and supports computerized information technology systems to small and midsize hospitals in the United States. Its enterprise-wide system automates the management of clinical and financial data across the primary functional areas of a hospital. The company offers services that enable customers to outsource certain data-related business processes in the areas of clinical care, revenue cycle management, cost control, and regulatory compliance.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.