For some, the best of both worlds can be described as dividends that generate moderate-to-high yields and provide growth opportunities to enhance future earnings. To find dividend stocks of this nature, we looked for two characteristics: a high level of liquidity and an EPS growth rate of over 25%. The two work together - a company needs those cash reserves to fund increased production, make strategic acquisitions, and open new markets. In our list today, we have dividend stocks offering yields of 3% or greater that have ample reserves to fuel their growth projections. We came up with a short, but interesting list to start your research.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
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 the company's ability to meet current obligations using liquid assets).
We first looked for dividend stocks. Next, we screened for businesses with estimated high-growth, with 1-year projected EPS growth above 25%. We then screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps or sectors.
Do you think these stocks deserve to trade higher? Use this list as a starting-off point for your own analysis.
1) Freeport-McMoRan Copper & Gold Inc. (FCX)
Freeport-McMoRan Copper & Gold Inc. has a Dividend Yield of 3.54%, a Payout Ratio of 33.75%, a 1-Year Projected Earnings Per Share Growth Rate of 42.80%, a Current Ratio of 3.46, and a Quick Ratio of 2.09. The short interest was 2.48% as of 08/17/2012. Freeport-McMoRan Copper & Gold Inc. engages in the exploration, mining, and production of mineral resources. The company primarily explores for copper, gold, molybdenum, cobalt hydroxide, silver, and other metals, such as rhenium and magnetite. It holds interests in various mines located in the Grasberg minerals district in Indonesia; Morenci minerals district in North America; South America; and Tenke Fungurume minerals district in the Democratic Republic of Congo.
2) Hooker Furniture Corp. (HOFT)
|Industry||Home Furnishings & Fixtures|
Hooker Furniture Corp. has a Dividend Yield of 3.36%, a Payout Ratio of 77.90%, a 1-Year Projected Earnings Per Share Growth Rate of 58.33%, a Current Ratio of 5.70, and a Quick Ratio of 4.06. The short interest was 6.59% as of 08/17/2012. Hooker Furniture Corporation, a home furnishings marketing and logistics company, together with its subsidiaries, designs, develops, imports, manufactures, and markets residential wood, metal, and upholstered furniture products in North America. The company offers casegoods products, including home entertainment, home office, accent, dining, and bedroom furniture under the Hooker Furniture, Envision, and Opus Designs by Hooker brand names; upholstered furniture under the Bradington-Young, Seven Seas, and Sam Moore brand names; upscale motion and stationary leather furniture; youth furniture under the Opus Designs by Hooker brand name; and private label products. It also offers various residential leather and fabric upholstered furniture under the Bradington-Young and Seven Seas upholstery brand; specializes in leather reclining and motion chairs, sofas, club chairs, and executive desk chairs; and offers upscale occasional chairs and other seating under the Sam Moore upholstery brand. The company serves retailers of residential home furnishings, including independent furniture stores, specialty retailers, department stores, catalog and Internet merchants, interior designers, and national and regional retail chains.
3) Ennis Inc. (EBF)
Ennis Inc. has a Dividend Yield of 4.78%, a Payout Ratio of 70.01%, a 1-Year Projected Earnings Per Share Growth Rate of 67.91%, a Current Ratio of 5.21, and a Quick Ratio of 2.25. The short interest was 3.13% as of 08/17/2012. Ennis, Inc., together with its subsidiaries, engages in the print and manufacture of business forms and other business products. The company operates in two segments, Print and Apparel. The Print segment designs, manufactures, and sells business forms and other printed business products.
4) Gold Resource Corp (GORO)
Gold Resource Corp has a Dividend Yield of 3.97%, a Payout Ratio of 15.24%, a 1-Year Projected Earnings Per Share Growth Rate of 35.90%, a Current Ratio of 6.25, and a Quick Ratio of 5.82. The short interest was 14.45% as of 08/17/2012. Gold Resource Corporation, an exploration stage company, engages in the exploration for and production of gold and silver in Mexico. It also explores copper, lead, and zinc ores. The company holds a 100% interest in 6 properties, including the El Aguila Project, the El Rey property, the Las Margaritas property, the Solaga property, the Alta Gracia property, and the El Chamizo property located in southern State of Oaxaca.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.