5 Highly Liquid Dividend Stocks With Strong Inventory Trends

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Includes: EML, FL, FLXS, IEX, LANC
by: Kapitall

Do you like to rely on stocks' dividend income? If so, we ran a screen to find dividend stocks with encouraging sales trends.

We began by screening for highly liquid dividend stocks: those paying dividend yields above 2%, sustainable payout ratios below 50%, and those with current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.

We then screened for strong sales trends by comparing growth in revenue to growth in inventory over the last year. We screened for stocks with positive sales trends, with faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

To screen for strengthening liquidity, we also only focused on those companies with inventory decreasing as a percent of current assets.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

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Do you think these stocks pay reliable dividends? Use this list as a starting point for your own analysis.

List sorted by current ratio.

1. Eastern Co. (EML): Manufactures and sells industrial hardware, security products, and metal products in North America. Market cap at $110.85M, most recent closing price at $17.83. Dividend yield at 2.24%, payout ratio at 35.55%. Current ratio at 4.85. Revenue grew by 22.02% during the most recent quarter ($40.5M vs. $33.19M y/y). Inventory grew by 4% during the same time period ($30.16M vs. $29M y/y). Inventory, as a percentage of current assets, decreased from 47.82% to 43.84% during the most recent quarter (comparing 13 weeks ending 2012-03-31 to 13 weeks ending 2011-04-02).

2. Lancaster Colony Corporation (LANC): Engages in the manufacture and marketing of consumer products focusing primarily on specialty foods for the retail and foodservice markets in the United States. Market cap at $1.89B, most recent closing price at $69.60. Dividend yield at 2.08%, payout ratio at 38.05%. Current ratio at 4.68. Revenue grew by 7.32% during the most recent quarter ($271.1M vs. $252.62M y/y). Inventory grew by -3.69% during the same time period ($100.28M vs. $104.12M y/y). Inventory, as a percentage of current assets, decreased from 32.82% to 26.48% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

3. Flexsteel Industries Inc. (FLXS): Manufactures, imports, and markets residential and commercial upholstered and wooden furniture products in the United States. Market cap at $145.45M, most recent closing price at $21.52. Dividend yield at 2.81%, payout ratio at 20.86%. Current ratio at 4.37. Revenue grew by 7.58% during the most recent quarter ($91.63M vs. $85.17M y/y). Inventory grew by 0.99% during the same time period ($75.48M vs. $74.74M y/y). Inventory, as a percentage of current assets, decreased from 58.45% to 56.17% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

4. Foot Locker, Inc. (FL): Operates as a retailer of athletic footwear and apparel. Market cap at $5.01B, most recent closing price at $33.23. Dividend yield at 2.18%, payout ratio at 32.86%. Current ratio at 3.54. Revenue grew by 8.68% during the most recent quarter ($1,578M vs. $1,452M y/y). Inventory grew by -1.12% during the same time period ($1,146M vs. $1,159M y/y). Inventory, as a percentage of current assets, decreased from 54.16% to 50.91% during the most recent quarter (comparing 13 weeks ending 2012-04-28 to 13 weeks ending 2011-04-30).

5. IDEX Corporation (IEX): Engages in the manufacture and sale of an array of pumps, flow meters, other fluidics systems and components, and engineered products worldwide. Market cap at $3.21B, most recent closing price at $38.09. Dividend yield at 2.10%, payout ratio at 29.35%. Current ratio at 3.06. Revenue grew by 8.89% during the most recent quarter ($494.14M vs. $453.8M y/y). Inventory grew by -9.87% during the same time period ($254.5M vs. $282.38M y/y). Inventory, as a percentage of current assets, decreased from 34.69% to 31.89% during the most recent quarter (comparing 3 months ending 2012-06-30 to 3 months ending 2011-06-30).

*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.