3 High-Yield Dividend Stocks Generating Profits Without Taking On Debt

Includes: CHT, CZNC, SUNS
by: ZetaKap

A high yield from a dividend stock is preferable, but if that company has considerable debt on the books, it is likely that the attractive payout rate will not be sustainable. We all know that eventually, debt has a way of impinging upon the well being of a company. Today we have a short list of dividend stocks that have attributes that speak to investors who are looking for dividend stocks that will provide income over the long term: minimal debt, high yields, and hefty profit margins. Use the brief summaries below to begin your own investigation of these high-yield dividend stocks.

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.

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 with its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it with 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 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 competitors.

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 stocks with a very high yield (more than 5%). From here, we then looked for companies that have maintained a sound capital structure (D/E Ratio<.1). Next, we then screened for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). We then looked for companies with strong profit margins (1-year operating margin>15%)(1-year fiscal EPS Growth Rate>10%). We did not screen out any market caps or sectors.

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

1) Chunghwa Telecom Co. Ltd. (NYSE:CHT)

Sector Technology
Industry Telecom Services - Domestic
Market Cap $30.29B
Beta 0.40

CHT stock chart

Key Metrics

Dividend Yield 5.81%
Payout Ratio 95.99%
Debt/Equity Ratio 0.01
Long Term Debt/Equity Ratio 0.00
Operating Profit Margin 22.70%
Earnings Per Share Growth Rate 24.90%
Short Interest 0.51%

Chunghwa Telecom Co., Ltd. provides integrated telecommunication services primarily in Taiwan. It offers domestic fixed communications services, including local and domestic long distance telephone, broadband access, local and domestic long distance leased line, multimedia-on-demand, Wi-Fi, and domestic data services; mobile communications services comprising mobile, paging, information and communication technology, corporate solution, and bill handling services; Internet, data communication, Internet data center, and other Internet services; international fixed communications services that comprise international long distance telephone, international leased line, international data, satellite, and other services, including the provision of interconnection of its fixed line network and mobile network with other operators; and ICT services, such as cloud computing. The company was founded in 1996 and its headquarters is in Taipei, Taiwan.

2) Citizens & Northern Corporation (NASDAQ:CZNC)

Sector Financial
Industry Regional - Mid-Atlantic Banks
Market Cap $221.91M
Beta 0.55

CZNC stock chart

Key Metrics

Dividend Yield 5.30%
Payout Ratio 35.92%
Debt/Equity Ratio 0.02
Long Term Debt/Equity Ratio 0.00
Operating Profit Margin 49.44%
Earnings Per Share Growth Rate 32.53%
Short Interest 1.87%

Citizens & Northern Corporation operates as the bank holding company for Citizens & Northern Bank that provides various banking and mortgage services to individual and corporate customers in north central Pennsylvania, and southern New York. The company's deposit products include various checking accounts, passbook and statement savings, money market accounts, interest checking accounts, individual retirement accounts, and certificates of deposits, as well as non-insured Repo Sweep accounts. The company was founded in 1971 and is based in Wellsboro, Pennsylvania.

3) Solar Senior Capital Ltd (NASDAQ:SUNS)

Sector Financial
Industry Asset Management
Market Cap $165.68M
Beta -

SUNS stock chart

Key Metrics

Dividend Yield 8.08%
Payout Ratio 65.91%
Debt/Equity Ratio 0.00
Long Term Debt/Equity Ratio 0.00
Operating Profit Margin 64.83%
Earnings Per Share Growth Rate 122.60%
Short Interest 2.52%

Solar Senior Capital Ltd., a business development company, provides investment management services in the United States. The company primarily invests in senior secured loans, including first lien, unitranche, and second lien debt instruments. It serves middle-market companies. The company was founded in 2010 and its headquarters is in New York, New York.

Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 11/05/2012.

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.

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