When you want to round out your investment portfolio with well established dividends, the large cap arena provides a sound choice. Here, you find companies that have already weathered multiple economic ups and downs, and they have maintained a strong mission. Opportunities to build wealth with dividends at this level exist by selecting those with moderate to high yields, and that have a track record of profitability. With this in mind, we developed a list of large cap dividend stocks that have yields of 3% or better, and strong profit margins. Additionally, our selection only includes dividend stocks that have recent "Buy" ratings from industry analysts.
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 their competitors.
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage of return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
We first looked for large cap dividend stocks. Next, we then screened for businesses that analysts rate as "Buy" (2< mean recommendation <3). We then looked for businesses with strong profit margins (1-year operating margin>15%)(ROE [TTM]>30%). We did not screen out any sectors.
Do you think these large-cap stocks are worth more than the market currently says? Please use our list to assist with your own analysis.
1) McDonald's Corp. (MCD)
McDonald's Corp. has a Dividend Yield of 3.19%, a Payout Ratio of 50.28%, a Analysts' Rating of 2.30, a Operating Profit Margin of 31.45%, and a Return on Equity of 37.93%. The short interest was 0.85% as of 08/16/2012. McDonald's Corporation, together with its subsidiaries, franchises and operates McDonald's restaurants primarily in the United States, Europe, the Asia Pacific, the Middle East, and Africa. The company's restaurants offer hamburgers and cheeseburgers, Big Mac, Quarter Pounder with cheese, Filet-O-Fish, chicken sandwiches, chicken McNuggets, chicken selects, snack wraps, french fries, salads, shakes, desserts, sundaes, soft serve cones, pies, cookies, soft drinks, coffee, and other beverages, as well as full or limited breakfast menu. As of December 31, 2011, it operated 33,510 restaurants in 119 countries, including 27,075 franchised restaurants and 6,435 company operated restaurants. The company was founded in 1940 and is based in Oak Brook, Illinois.
2) BHP Billiton plc (BBL)
|Industry:||Industrial Metals & Minerals|
BHP Billiton plc has a Dividend Yield of 3.61%, a Payout Ratio of 25.60%, a Analysts' Rating of 2.50, a Operating Profit Margin of 43.96%, and a Return on Equity of 38.59%. The short interest was 0.06% as of 08/16/2012. BHP Billiton Plc, together with its subsidiaries, operates as a diversified natural resources company. The company engages in the exploration, development, production, and marketing of oil and gas properties. It is also involved in the mining of bauxite, refining of bauxite into alumina, and smelting of alumina into aluminum metal; and mining of copper, silver, lead, zinc, molybdenum, uranium, gold, diamond, titanium, nickel, iron ore, metallurgical coal, and thermal or steaming coal.
3) Baxter International Inc. (BAX)
|Industry:||Medical Instruments & Supplies|
Baxter International Inc. has a Dividend Yield of 3.03%, a Payout Ratio of 31.98%, a Analysts' Rating of 2.20, a Operating Profit Margin of 20.12%, and a Return on Equity of 33.78%. The short interest was 1.32% as of 08/16/2012. Baxter International Inc., through its subsidiaries, develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. The company operates in two segments: BioScience and Medical Products. The BioScience segment processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions; products for regenerative medicine, such as biosurgery products; and certain vaccines. The Medical Products segment manufactures intravenous (IV) solutions and administration sets, premixed drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, IV nutrition products, infusion pumps, and inhalation anesthetics.
*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.