Do you appreciate stocks that pay regular and reliable dividends? Here's a list with that idea in mind.
We began by screening for "dividend champion" stocks, those listed by DRiP Investing as those that have consistently increased their dividends over the last 25 years. We also screened for those paying dividend yields above 2% and sustainable payout ratios below 50%.
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,
•Decreasing leverage, (i.e. decreasing Asset/Equity ratio)
•Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Tool provided by Kapitall. More investing ideas on Kapitall Wire.
Do you think these stocks will continue to pay their dividends indefinitely? Use this list as a starting point for your own analysis.
List sorted by dividend yield.
1. Mine Safety Appliances Co. (MSA): Develops, manufactures, and supplies health and safety products used by workers in the fire service, homeland security, construction, and other industries, as well as the military. Market cap at $1.31B, most recent closing price at $35.39. Dividend yield at 3.16%, payout ratio at 44.22%. MRQ net profit margin at 9.24% vs. 6.62% y/y. MRQ sales/assets at 0.266 vs. 0.236 y/y. MRQ assets/equity at 2.394 vs. 2.591 y/y.
2. American States Water Company (AWR): Provides water, electric, and contracted services in the United States. Market cap at $765.53M, most recent closing price at $40.59. Dividend yield at 2.76%, payout ratio at 46.95%. MRQ net profit margin at 9.49% vs. 8.05% y/y. MRQ sales/assets at 0.086 vs. 0.078 y/y. MRQ assets/equity at 3.004 vs. 3.162 y/y.
3. Wal-Mart Stores Inc. (WMT): Operates retail stores in various formats worldwide. Market cap at $252.14B, most recent closing price at $74.52. Dividend yield at 2.13%, payout ratio at 31.81%. MRQ net profit margin at 3.31% vs. 3.26% y/y. MRQ sales/assets at 0.573 vs. 0.559 y/y. MRQ assets/equity at 2.858 vs. 2.865 y/y.
4. Hormel Foods Corp. (HRL): Produces and markets various meat and food products in the United States and Internationally. Market cap at $7.48B, most recent closing price at $28.40. Dividend yield at 2.11%, payout ratio at 31.10%. MRQ net profit margin at 6.35% vs. 5.59% y/y. MRQ sales/assets at 0.467 vs. 0.44 y/y. MRQ assets/equity at 1.541 vs. 1.688 y/y.
5. Telephone & Data Systems Inc. (TDS): Provides wireless and wireline telecommunications services in the United States. Market cap at $2.59B, most recent closing price at $23.86. Dividend yield at 2.05%, payout ratio at 23.76%. MRQ net profit margin at 4.% vs. 3.46% y/y. MRQ sales/assets at 0.16 vs. 0.156 y/y. MRQ assets/equity at 2.037 vs. 2.102 y/y.
6. Parker Hannifin Corporation (PH): Manufactures fluid power systems, electromechanical controls, and related components. Market cap at $12.3B, most recent closing price at $81.40. Dividend yield at 2.01%, payout ratio at 20.84%. MRQ net profit margin at 9.2% vs. 8.63% y/y. MRQ sales/assets at 0.312 vs. 0.285 y/y. MRQ assets/equity at 1.952 vs. 2.075 y/y.
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.