Are you a dividend investor searching for stocks with solid yields of 3% and greater? One great place to search is among those that can sustain their payouts due to strong sources of profitability, matched by analyst recommendation. Today we screened for stocks of this nature, focusing on stocks with 'Strong Buy' analyst ratings, and came up with a short but intriguing 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. Also, 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.
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. Also, 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 dividend stocks. From here, we then looked for companies that analysts rate as "Strong Buy" (mean recommendation < 2). We then looked for businesses that have been able to maintain a sound level of profitability for shareholders (ROE (TTM)>30%) (ROA (TTM)>10%). We did not screen out any market caps or sectors.
Do you think these stocks will offer healthy returns? Please use our list to assist with your own analysis.
1) Deluxe Corporation (DLX)
Deluxe Corp. has a Dividend Yield of 3.78%, a Payout Ratio of 32.88%, an Analysts' Rating of 1.30, a Return on Equity of 52.83%, and a Return on Assets of 11.45%. The short interest was 15.23% as of July 15, 2012. Deluxe Corporation, together with its subsidiaries, provides printed products, forms, and marketing solutions to small businesses and financial institutions primarily in the United States, Canada, Europe, and South America.
The company offers checks; printed forms, including billing forms, work orders, job proposals, purchase orders, invoices, and personnel forms, as well as computer forms, deposit tickets, and check registers; and accessories and other products, such as envelopes, office supplies, stamps, and labels, as well as retail packaging supplies and checkbook covers.
It also provides marketing solutions, which include Web design, hosting and other Web services, logo design, search engine marketing, and digital printing services for the sales and marketing needs of small businesses, business cards, greeting cards, brochures, and apparel; and customer acquisition programs and marketing communications services, and package insert programs. In addition, the company offers fraud protection services; payroll services; and financial institution profitability, regulatory, and compliance programs.
2) Female Health Company (FHCO)
Female Health Company has a Dividend Yield of 3.93%, a Payout Ratio of 58.47%, an Analysts' Rating of 1.00, a Return on Equity of 60.08%, and a Return on Assets of 49.08%. The short interest was 5.08% as of July 15, 2012. Female Health Company manufactures, markets, and sells consumer healthcare products in the United States and internationally. It offers the FC2 female condom, which provides dual protection against unintended pregnancy and sexually transmitted diseases, including HIV/AIDS. Female Health Company sells its products to public health clinics, as well as not-for-profit organizations.
3) Tesoro Logistics LP (TLLP)
|Industry:||Oil & Gas Pipelines|
Tesoro Logistics LP has a Dividend Yield of 4.28%, a Payout Ratio of 49.70%, an Analysts' Rating of 1.50, a Return on Equity of 37.57%, and a Return on Assets of 29.45%. The short interest was 0.07% as of July 15, 2012. Tesoro Logistics LP engages in the ownership, operation, development, and acquisition of crude oil and refined products logistics assets in the United States.
The company is involved in the gathering, terminalling, transportation, and storage of crude oil and refined products. Its assets consist of a crude oil gathering system in the Bakken Shale/Williston Basin area of North Dakota and Montana; eight refined products terminals in the midwestern and western United States; a crude oil and refined products storage facility; and five related short-haul pipelines.
*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.