Companies at the mid-cap level obviously have room to grow, but finding the ones that will reach the next level can be a bit of a guessing game. To slice off some of the uncertainty, analyzing liquidity is a helpful strategy. Today, we looked for mid-cap dividend stocks with substantial cash reserves. If used responsibly, the funds will spark expansion and increase earnings. Our list below includes companies that rose to the top, and all have the additional bonus of receiving a 'Buy' or better rating from analysts.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for mid cap dividend stocks. We then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). 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 mid-cap stocks will perform well? Use our list to help with your own analysis.
1) Maxim Integrated Products Inc. (NASDAQ:MXIM)
|Industry:||Semiconductor - Broad Line|
Maxim Integrated Products Inc. has a Dividend Yield of 3.53%, a Payout Ratio of 68.88%, a Current Ratio of 3.74, a Quick Ratio of 3.24, and an Analysts' Rating of 2.30. The short interest was 0.90% as of 08/03/2012. Maxim Integrated Products, Inc. engages in designing, developing, manufacturing, and marketing various linear and mixed-signal integrated circuits worldwide. The company also provides various high-frequency process technologies and capabilities for use in custom designs. It primarily serves industrial, communications, consumer, and computing markets.
2) Microchip Technology Inc. (NASDAQ:MCHP)
|Industry:||Semiconductor - Specialized|
Microchip Technology Inc. has a Dividend Yield of 4.19%, a Payout Ratio of 79.21%, a Current Ratio of 8.13, a Quick Ratio of 7.26, and an Analysts' Rating of 2.40. The short interest was 10.68% as of 08/03/2012. Microchip Technology Incorporated engages in the development, manufacture, and sale of semiconductor products for embedded control applications.
The company offers microcontrollers, such as 8-bit, 16-bit, and 32-bit microcontrollers marketed under the PIC brand name, as well as 16-bit dsPIC digital signal controllers (DSC); and development tools that enable system designers to program a PIC microcontroller and dsPIC DSC for specific applications. It also provides analog and interface products, including power management, linear, mixed-signal, thermal management, RF Linear drivers, safety and security, and interface products; and memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, and serial SRAM memories for production of very small footprint devices.
In addition, the company licenses its SuperFlash technology to foundries, integrated device manufacturers, and design partners for use in the manufacture of their advanced microcontroller products, gate array, RF, and analog products that require embedded flash; and provides engineering services.
3) Cinemark Holdings Inc. (NYSE:CNK)
|Industry:||Movie Production, Theaters|
Cinemark Holdings Inc. has a Dividend Yield of 3.55%, a Payout Ratio of 65.71%, a Current Ratio of 2.09, a Quick Ratio of 2.06, and an Analysts' Rating of 2.20. The short interest was 3.20% as of 08/03/2012. Cinemark Holdings, Inc., together with its subsidiaries, engages in motion picture exhibition business. As of March 31, 2012, it operated 459 theatres with 5,181 screens in the United States, Brazil, Mexico, Argentina, and rest of Latin America. The company was founded in 1984 and is headquartered in Plano, Texas.
*Company profiles were sourced from Google Finance and Yahoo Finance. 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.