3 Low-Debt, High Yield Financial Dividends Raking In Profits

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Includes: HQH, HQL, NRT
by: ZetaKap

Investing in dividends, especially those that offer high yields, is a path that many savvy investors prefer when it comes to building wealth. To find companies with reliable long-term yields, today we focused on financial dividends with strong track records of generating profits. In addition, we also screened for companies with minimal debt. These two traits, negligible debt and impressive profits point to a well run company. We think you will be intrigued by what we found.

The long-term debt/equity ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

The debt/equity ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.

We first looked for financial stocks with a very high yield (more than 5%). Then we looked for businesses that have maintained a sound long-term capital structure (Long Term D/E Ratio<.1). Next, we screened for businesses that operate with little to no debt (D/E Ratio<.1). Next, we then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year fiscal EPS growth rate>10%). We did not screen out any market caps.

Do you think these stocks hold value that has yet to be priced in? Use our screened list as a starting point for your own analysis.

1) North European Oil Royalty Trust (NYSE:NRT)

Sector Financial
Industry Diversified Investments
Market Cap $265.59M
Beta 0.32
Click to enlarge

NRT stock chart

Key Metrics

Dividend Yield 8.96%
Payout Ratio 99.79%
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Return on Assets 377.11%
Earnings Per Share Growth Rate 29.25%
Short Interest 0.04%
Click to enlarge

North European Oil Royalty Trust, a grantor trust, holds overriding royalty rights covering gas and oil production in concessions or leases in the Federal Republic of Germany. It holds these rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies.

2) H&Q Healthcare Investors (NYSE:HQH)

Sector Financial
Industry Closed-End Fund - Equity
Market Cap $445.81M
Beta 0.80
Click to enlarge

HQH stock chart

Key Metrics

Dividend Yield 8.40%
Payout Ratio 30.00%
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Return on Assets 18.54%
Earnings Per Share Growth Rate 58.71%
Short Interest 1.77%
Click to enlarge

H&Q Healthcare Investors is a close ended equity mutual fund launched and managed by Hambrecht & Quist Capital Management, LLC. The fund invests in the public equity markets across the globe. It invests in stocks of companies operating in the biotechnology, medical devices, and pharmaceuticals industries.

3) H&Q Life Sciences Investors (NYSE:HQL)

Sector Financial
Industry Closed-End Fund - Equity
Market Cap $210.26M
Beta 0.82
Click to enlarge

HQL stock chart

Key Metrics

Dividend Yield 8.07%
Payout Ratio 23.70%
Long Term Debt/Equity Ratio 0.00
Debt/Equity Ratio 0.00
Return on Assets 19.25%
Earnings Per Share Growth Rate 450.72%
Short Interest 1.32%
Click to enlarge

H&Q Life Sciences Investors is a close ended equity mutual fund launched and managed by Hambrecht & Quist Capital Management, LLC. The fund invests in the public equity markets across the globe. It invests in stocks of companies operating in the health technology and life sciences industries.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 21, 2012.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.