Dividend stocks are a solid approach to diversifying an investment portfolio. Investing in companies that are in the large cap range is particularly appealing because they already have proven their commitment to sound management and profitability. The following companies offer moderate to high yields and are rated by analysts as "Buy" or "Strong Buy". The list is diverse and presents investment options in multiple categories which may be of interest for those seeking new opportunities.
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 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 large cap dividend stocks. We next screened for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(Net Margin [TTM] >10%). Next, we then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any sectors.
Do you think these large-cap stocks will go up in valuation? Please use our list to assist with your own analysis.
1) Sempra Energy (NYSE:SRE)
Sempra Energy has a Dividend Yield of 3.49%, a Payout Ratio of 36.70%, a Earnings Per Share Growth Rate of 88.51%, a Net Margin of 13.64%, and a Analysts' Rating of 2.30. The short interest was 1.63% as of 07/25/2012. Sempra Energy operates as an energy services holding company worldwide. The company operates utilities, develops new energy infrastructure, and provides energy-related services to approximately 31 million consumers worldwide. It operates in five segments: San Diego Gas & Electric, Southern California Gas Co.
2) The Toronto-Dominion Bank (NYSE:TD)
|Industry:||Money Center Banks|
The Toronto-Dominion Bank has a Dividend Yield of 3.65%, a Payout Ratio of 41.37%, a Earnings Per Share Growth Rate of 27.52%, a Net Margin of 26.79%, and a Analysts' Rating of 1.70. The short interest was 0.40% as of 07/25/2012. The Toronto-Dominion Bank, together with its subsidiaries, provides financial and banking services in North America and internationally. The company's Canadian Personal and Commercial Banking segment offers various financial products and services to personal and small business customers. It also provides banking solutions through telephone and Internet banking, as well as operates approximately 2,780 automated banking machines, and a network of 1,150 branches located in Canada.
3) Royal Bank of Canada (NYSE:RY)
|Industry:||Money Center Banks|
Royal Bank of Canada has a Dividend Yield of 4.47%, a Payout Ratio of 50.99%, a Earnings Per Share Growth Rate of 26.49%, a Net Margin of 23.96%, and a Analysts' Rating of 2.20. The short interest was 0.92% as of 07/25/2012. Royal Bank of Canada provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services under the RBC name worldwide. The company's Canadian Banking segment offers personal financial services, business financial services, and cards and payment solutions. Its Wealth Management segment provides wealth and asset management, and estate and trust services to affluent and high net worth clients through distributors, as well as directly to institutional and individual clients.
4) American Electric Power Co., Inc. (NYSE:AEP)
American Electric Power Co., Inc. has a Dividend Yield of 4.54%, a Payout Ratio of 56.11%, a Earnings Per Share Growth Rate of 28.71%, a Net Margin of 10.53%, and a Analysts' Rating of 2.30. The short interest was 1.19% as of 07/25/2012. American Electric Power Company, Inc., a public utility holding company, engages in the generation, transmission, and distribution of electric power to retail customers. It generates electricity using coal and lignite, natural gas, nuclear energy, and hydroelectric energy. The company also supplies and markets electric power at wholesale to other electric utility companies, municipalities, and other market participants. As of December 31, 2011, it owned and leased approximately 37,000 megawatts of domestic generation capacity.
5) Merck & Co. Inc. (NYSE:MRK)
|Industry:||Drug Manufacturers - Major|
Merck & Co. Inc. has a Dividend Yield of 3.94%, a Payout Ratio of 68.50%, a Earnings Per Share Growth Rate of 634.53%, a Net Margin of 14.71%, and a Analysts' Rating of 2.10. The short interest was 0.85% as of 07/25/2012. Merck & Co., Inc. provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. The company provides human health pharmaceutical products, such as therapeutic and preventive agents for the treatment of human disorders in the areas of cardiovascular, diabetes and obesity, respiratory, immunology infectious diseases, neurosciences and ophthalmology, oncology, vaccines, and women's health and endocrine. It also offers vaccines, including preventive pediatric, adolescent, and adult vaccines.
6) BT Group plc (NYSE:BT)
|Industry:||Telecom Services - Foreign|
BT Group plc has a Dividend Yield of 3.58%, a Payout Ratio of 32.67%, a Earnings Per Share Growth Rate of 31.91%, a Net Margin of 10.60%, and a Analysts' Rating of 2.00. The short interest was 0.01% as of 07/25/2012. BT Group plc provides communications solutions and services worldwide. It operates in four segments: BT Global Services, BT Retail, BT Wholesale, and Openreach. BT Global Services segment provides networked IT services to multinational corporations, domestic businesses, and national and local government departments.
7) Williams Companies, Inc. (NYSE:WMB)
|Industry:||Oil & Gas Pipelines|
Williams Companies, Inc. has a Dividend Yield of 4.04%, a Payout Ratio of 68.10%, a Earnings Per Share Growth Rate of 662.48%, a Net Margin of 13.33%, and a Analysts' Rating of 1.90. The short interest was 2.53% as of 07/25/2012. The Williams Companies, Inc. operates as an energy infrastructure company in the United States. The company's Williams Partners segment owns and operates natural gas pipeline system extending from Texas, Louisiana, Mississippi, and the offshore Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Pennsylvania, and New Jersey to the New York City metropolitan area. It also owns and operates mainline and lateral transmission pipelines extending from the San Juan basin in northwestern New Mexico and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a point on the Canadian border near Sumas, Washington.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.