We all know people who tend to think in terms of extremes. They evaluate situations, people, investments and more in simple opposites: Good or bad. But we know that this type of thinking can be too narrow and misses out on exploring complexities. For many investors, the financial sector is understandably unpopular. But when we consider investing in companies that have attributes that we seek in other sectors, like profitability and minimal debt, it can make us rethink our avoidance and see if there is more to the story.
With this in mind, we developed a list of financial dividend stocks that have moderate to high yields. All of the companies in our list have taken care to not burden themselves with unmanageable long-term debt and are generating strong earnings. Take a look at the list of financial dividend stocks with low debt and great returns to see if any capture your interest.
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.
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.
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.
We first looked for financial dividend stocks. We then looked for companies that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(1-year operating margin>15%). We then looked for businesses that have maintained a sound long-term capital structure (Long-Term D/E Ratio<.1). We did not screen out any market caps.
Do you think these stocks should have higher valuations? Use our list along with your own analysis.
1) People's United Financial Inc. (PBCT)
|Industry||Savings & Loans|
|Earnings Per Share Growth Rate||138.03%|
|Operating Profit Margin||27.05%|
|Long Term Debt/Equity Ratio||0.03|
People's United Financial, Inc. operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. It operates in three segments: Commercial Banking; Retail and Business Banking; and Wealth Management. The company was founded in 1842 and is headquartered in Bridgeport, Connecticut.
2) Chemical Financial Corp. (CHFC)
|Industry||Regional - Midwest Banks|
|Earnings Per Share Growth Rate||78.30%|
|Operating Profit Margin||30.42%|
|Long Term Debt/Equity Ratio||0.00|
Chemical Financial Corporation operates as the financial holding company of Chemical Bank that offers banking and fiduciary products and services to residents and business customers in Michigan. Its products and services include business and personal checking accounts, savings and individual retirement accounts, time deposit instruments, electronically accessed banking products, residential and commercial real estate financing, commercial lending, consumer financing, debit cards, safe deposit box services, money transfer services, automated teller machines, access to insurance and investment products, corporate and personal wealth management services, and other banking services. The company was founded in 1973 and is headquartered in Midland, Michigan.
3) CME Group Inc. (CME)
|Industry||Investment Brokerage - National|
|Earnings Per Share Growth Rate||89.73%|
|Operating Profit Margin||57.08%|
|Long Term Debt/Equity Ratio||0.10|
CME Group Inc. operates the CME, CBOT, NYMEX and COMEX futures exchanges worldwide. The company provides a range of products across various asset classes, such as interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather, and real estate. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group Inc. was founded in 1898 and is headquartered in Chicago, Illinois.
4) Sandy Spring Bancorp Inc. (SASR)
|Industry||Regional - Mid-Atlantic Banks|
|Earnings Per Share Growth Rate||81.94%|
|Operating Profit Margin||30.36%|
|Long Term Debt/Equity Ratio||0.07|
Sandy Spring Bancorp, Inc. operates as the holding company for Sandy Spring Bank, which is a state chartered bank that provides commercial banking services to individuals and businesses in central Maryland and northern Virginia. The company offers various deposit products, including interest-bearing demand deposits, regular savings deposits, money market savings deposits, and time deposits. The company was founded in 1868 and is headquartered in Olney, Maryland.
*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.