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Do you prefer stocks that pay part of their returns in dividends? We ran a screen on dividend stocks that you might be interested in.

We began by screening for high yield dividend stocks: those paying dividend yields above 3% and sustainable payout ratios below 50%.

Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:

ROE

= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,

  • Decreasing leverage, (i.e. decreasing Asset/Equity ratio)
  • Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.

For an interactive version of this chart, click on the image below. Market cap data sourced from Zacks Investment Research.

Tool provided by Kapitall.

Do you think these stocks pay reliable dividends? Use this list as a starting point for your own analysis.

List sorted by dividend yield. List Average 1-Year Return: 25%.

1. NL Industries Inc. (NYSE:NL): Operates in the component products industry in the United States, Canada, and Taiwan. Market cap at $519.8M, most recent closing price at $10.68. Dividend yield at 4.78%. Payout ratio: 25.72%. MRQ net profit margin at 69.07% vs. 48.01% y/y. MRQ sales/assets at 0.055 vs. 0.05 y/y. MRQ assets/equity at 1.858 vs. 1.927 y/y.

2. Belo Corp. (NYSE:BLC): Operates as a television company. Market cap at $737.32M, most recent closing price at $7.89. Dividend yield at 4.06%. Payout ratio: 28.69%. MRQ net profit margin at 14.6% vs. 10.87% y/y. MRQ sales/assets at 0.109 vs. 0.106 y/y. MRQ assets/equity at 5.482 vs. 5.896 y/y.

3. Sunoco Logistics Partners L.P. (NYSE:SXL): Engages in the transport, terminalling, and storage of refined products and crude oil, as well as the purchase and sale of crude oil in the United States. Market cap at $5.03B, most recent closing price at $48.56. Dividend yield at 3.79%. Payout ratio: 47.75%. MRQ net profit margin at 4.58% vs. 3.87% y/y. MRQ sales/assets at 0.64 vs. 0.496 y/y. MRQ assets/equity at 4.232 vs. 4.869 y/y.

4. Deluxe Corp. (NYSE:DLX): Provides various personalized printed products, promotional products, and merchandising materials to small businesses and financial institutions in the United States, Canada, and Europe. Market cap at $1.5B, most recent closing price at $29.65. Dividend yield at 3.4%. Payout ratio: 31.44%. MRQ net profit margin at 11.39% vs. 10.24% y/y. MRQ sales/assets at 0.261 vs. 0.259 y/y. MRQ assets/equity at 3.962 vs. 5.026 y/y.

5. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL): Engages in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept in the United States. Market cap at $1.54B, most recent closing price at $65.02. Dividend yield at 3.1%. Payout ratio: 25.88%. MRQ net profit margin at 4.96% vs. 2.86% y/y. MRQ sales/assets at 0.493 vs. 0.468 y/y. MRQ assets/equity at 3.708 vs. 4.891 y/y.

6. Dr Pepper Snapple Group, Inc. (NYSE:DPS): Engages in the manufacture and distribution of non-alcoholic beverages in the United States, Canada, and Mexico. Market cap at $9.36B, most recent closing price at $44.46. Dividend yield at 3.07%. Payout ratio: 46.68%. MRQ net profit margin at 10.98% vs. 10.87% y/y. MRQ sales/assets at 0.182 vs. 0.171 y/y. MRQ assets/equity at 3.881 vs. 3.949 y/y.

7. Mine Safety Appliances Co. (NYSE:MSA): Develops, manufactures, and supplies health and safety products used by workers in the fire service, homeland security, construction, and other industries, as well as the military. Market cap at $1.37B, most recent closing price at $37.07. Dividend yield at 3.06%. Payout ratio: 44.25%. MRQ net profit margin at 9.24% vs. 6.62% y/y. MRQ sales/assets at 0.266 vs. 0.236 y/y. MRQ assets/equity at 2.427 vs. 2.591 y/y.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Disclaimer: Kapitall is a team of analysts. This article was written by Rebecca Lipman, one of our writers. 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.

Source: 7 High Yield Dividend Stocks With Strong Sources Of Profitability