Are you a dividend investor on the hunt for profitable companies paying out reliable dividend income? Do you prefer mid to high yields, especially when their payout ratios are sustainable? If so, today we ran a screen that focuses on these traits. The companies we focused have these properties, but additionally look under-priced, according to their current price-multiples. The list of companies we came up with is short and diverse, but holds the kind of yields we think you're looking for.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A company that has a high P/E ratio generally indicates that investors have high expectations of the company relative to future earnings growth. By the opposite token, investors generally have lower expectations of a company with a low P/E ratio. A company that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus, the P/E is only as good as the quality of the earnings.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a company is cheap by its 12-month trailing sales numbers. In the most basic terms, it lets an investor know how much the investment community is willing to pay for every dollar's worth of sales. A company with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollar's worth of a company's sales. On the other hand, a company is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community, not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share.
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 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 company 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 dividend stocks. We then screened for businesses that are trading at a discount (P/E<10)(P/S<1). 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 or sectors.
Do you think these stocks have more value to price in? Use our list along with your own analysis.
1) Belo Corp. (BLC)
|Industry:||Broadcasting - TV|
Belo Corp. has a Dividend Yield of 4.88%, a Payout Ratio of 31.57%, a Price/Earnings Ratio of 8.99, a Price/Sales Ratio of 0.94, an Operating Profit Margin of 27.60%, and a Net Margin of 11.70%. The short interest was 9.00% as of July 22, 2012. Belo Corp. operates as a television company in the United States. The company owns 20 television stations, including ABC, CBS, NBC, FOX, CW, and MyNetwork TV affiliates, as well as their associated Web sites in 15 markets. It also owns two regional cable news operations, including Texas Cable News in Dallas/Fort Worth, Texas; and Northwest Cable News in Seattle/Tacoma, Washington.
2) Telecom Argentina S.A. (TEO)
|Industry:||Diversified Communication Services|
Telecom Argentina S.A. has a Dividend Yield of 8.02%, a Payout Ratio of 69.10%, a Price/Earnings Ratio of 4.13, a Price/Sales Ratio of 0.53, an Operating Profit Margin of 20.47%, and a Net Margin of 12.91%. The short interest was 1.22% as of July 22, 2012. Telecom Argentina S.A., together with its subsidiaries, provides telecommunication services to residential customers, businesses, and governmental agencies in Argentina and internationally.
It operates in two segments, Fixed Telephony and Mobile Services. The Fixed Telephony segment provides local fixed telephony, public telephony, domestic and international long-distance telephony, domestic and international point-to-point link, domestic and international telex, data transmission, videoconferencing, and broadcasting signal services; additional services, including call forwarding, call waiting, three-way calling, itemized billing, and voicemail; and Internet access in Argentina.
3) SK Telecom Co., Ltd. (SKM)
SK Telecom Co., Ltd. has a Dividend Yield of 6.06%, a Payout Ratio of 48.82%, a Price/Earnings Ratio of 6.35, a Price/Sales Ratio of 0.91, an Operating Profit Margin of 22.76%, and a Net Margin of 14.13%. The short interest was 0.42% as of July 22, 2012. SK Telecom Co., Ltd. provides wireless telecommunications services principally in Korea. The company offers cellular voice services, including wireless voice transmission and related value-added services; wireless global roaming services; and interconnection services to connect its networks to fixed-line and other wireless networks.
It also provides wireless data transmission services, such as wireless Internet access services, which allow subscribers to access online digital contents and services, as well as to send and receive text and multimedia messages; wireless entertainment-related contents and services primarily through content-specific portal sites; wireless finance-related contents and m-commerce services; and wireless news and search services comprising news content access, dictionary resources, and weather information services.
4) KRONOS Worldwide, Inc. (KRO)
Kronos Worldwide, Inc. has a Dividend Yield of 3.93%, a Payout Ratio of 17.51%, a Price/Earnings Ratio of 4.45, a Price/Sales Ratio of 0.85, aN Operating Profit Margin of 31.36%, and a Net Margin of 19.08%. The short interest was 27.18% as of July 22, 2012. Kronos Worldwide, Inc. engages in the production and marketing of titanium dioxide pigments under the Kronos brand name primarily in North America and Europe. It produces titanium dioxide pigments in two crystalline forms, rutile and anatase to impart whiteness, brightness, opacity, and durability for products, such as coatings, plastics, papers fibers, and ceramics, as well as for various specialty products, including inks, food, and cosmetics.
The company also offers ilmenite, a raw material used directly as a feedstock by sulfate-process titanium dioxide pigment plants; iron-based chemicals, which are co-products and processed co-products of the titanium dioxide pigment production process and used as treatment and conditioning agents for industrial effluents and municipal wastewater, as well as in the manufacture of iron pigments, cement, and agricultural products; and titanium oxychloride and titanyl sulfate, which are side-stream products from the production of titanium dioxide pigments.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Google Finance.