We all want to make money on the side. And many people want that supplemental income to come worry free, or at least not add to our stress. That is why many people like investing in dividend stocks. When an investor selects solid companies with reliable yields, there typically are nice payouts. Today we came up with a short list of dividends that provide moderate or better yields. To ensure that these yields will continue, we focused on profit. All of the companies in our list have attractive bottom lines. To add to the intrigue, they all appear to be offered below market value. We encourage you to view the list below to start your own assessment.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
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.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firms future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share
We first looked for dividend stocks. We then looked for companies that have been able to retain strong profit margins on the bottom line (Net Margin [TTM]>10%)(ROA [TTM]>10%). Next, we then screened for businesses that are trading at a discount (P/E<10)(P/CFO<10). We did not screen out any market caps or sectors.
Do you think these stocks hold solid value? Use our list to help with your own analysis.
1) Seagate Technology PLC (STX)
|Industry||Data Storage Devices|
|Return on Assets||29.61%|
|Price/Cash Flow Ratio||6.35|
Seagate Technology Public Limited Company designs, manufactures, markets, and sells hard disk drives for enterprise storage, client compute, and client non-compute market applications worldwide. The company's products are used in enterprise servers, mainframes, and workstations; desktop and notebook computers; and digital video recorders, gaming consoles, personal data backup systems, portable external storage systems, and digital media systems. It also provides data storage services, including online backup, data protection, and recovery solutions for small and medium-sized businesses. The company ships external backup storage solutions under its GoFlex, Backup Plus, and Expansion product lines, as well as under the Samsung brand name; and network attached storage solutions under its GoFlex Home and BlackArmor product lines. Seagate Technology Public Limited Company sells its products primarily to original equipment manufacturers, distributors, and retailers. The company was founded in 1979 and is headquartered in Dublin, Ireland.
2) USA Mobility, Inc. (USMO)
|Return on Assets||14.09%|
|Price/Cash Flow Ratio||5.91|
USA Mobility, Inc. provides wireless messaging, mobile voice, and data and unified communications solutions to the healthcare, government, and enterprise sectors in the United States. The company provides one-way and two-way messaging services. Its one-way messaging consists of numeric messaging services, which enable subscribers to receive messages comprising numbers, such as phone numbers; and alphanumeric messages, including numbers and letters that enables subscribers to receive text messages. The company's two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices, such as pagers, personal digital assistants, and personal computers. USA Mobility, Inc. also offers voice mail, personalized greeting, message storage and retrieval, and equipment loss and/or maintenance protection to its one-way and two-way messaging subscribers. In addition, the company provides mobile voice and data services through third party providers. Further, it offers software solutions, including critical unified communications solutions for contact centers, emergency management, mobile event notification, and smartphone messaging; professional services, such as consulting and training; and maintenance services, as well as sells equipment used with its software. The company serves businesses, professionals, management personnel, medical personnel, field sales personnel and service forces, members of the construction industry and construction trades, real estate brokers and developers, sales and service organizations, specialty trade organizations, manufacturing organizations, and government agencies. USA Mobility, Inc. is based in Springfield, Virginia.
3) Sauer-Danfoss Inc. (SHS)
|Return on Assets||17.41%|
|Price/Cash Flow Ratio||5.11|
Sauer-Danfoss Inc., together with its subsidiaries, engages in the design, manufacture, and sale of engineered hydraulic and electronic systems, and components that generate, transmit, and control power in mobile equipment worldwide. It offers closed circuit axial and bent axis piston hydrostatic transmissions for the propulsion of mobile equipment; open circuit piston pumps used to transform mechanical power from the engine to hydraulic power for various functions of the vehicle; geroller and gerotor motors used for propel and work functions; and hydrostatic steering units to convert steering wheel motion into hydraulic flow and pressure. The company also provides electronic controls, including microprocessor-based controllers, intelligent displays, joysticks, and electronic sensors, as well as develops and licenses software that helps its customers to integrate components into systems; and proportional valves, such as electro hydraulic valves for forestry and agricultural harvesting equipment, and mechanically actuated valves for construction equipment. In addition, it offers open circuit gear pumps and motors under the TurollaOCG brand name; cartridge valves and hydraulic integrated circuits under the Comatrol brand; directional control valves under the Valmova brand; inverters under the Schwarzmuller Inverter brand; and light duty hydrostatic transmissions, gear reduction drives, piston pumps, and wheel motors under the brand Hydro-Gear. The company sells its products directly or through distributors to original equipment manufacturers of mobile equipment, including construction, road building, agricultural, turf care, material handling, and specialty vehicle equipment. The company was founded in 1986 and is based in Ames, Iowa. Sauer-Danfoss Inc. is a subsidiary of Danfoss A/S.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/28/2012.