10 S&P 500 Dividend Stocks Reporting Earnings Next Week With Strong Sources Of Profitability

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Includes: CAT, DWDP, EMN, ETN, IPG, KLAC, NEE, TROW, WEC, WRK
by: Kapitall

Over 1,000 companies are reporting their third-quarter earnings next week – how do you pick which ones to follow?

For ideas, we screened the S&P 500 for stocks reporting next week that also pay dividend yields above 2%. We ran DuPont analysis on these companies to find those with strong sources of ROE profitability.

ROE can be broken up into three components such that increases in ROE can be attributed to those components.

ROE

= (Net Profit/Equity)

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

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

Analyzing the sources of returns for a company, we can focus on companies with the following 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)

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

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We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks will surprise the market next week? Use this list as a starting-off point for your own analysis.

List sorted by change in ROE.

1. KLA-Tencor Corporation (NASDAQ:KLAC): Engages in the design, manufacture, and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Market cap of $7.20B. Dividend yield at 3.24%, payout ratio at 21.07%. Earnings to be announced on 10/27. MRQ Net Profit Margin increased to 27.46% from 20.21% year-over-year, Sales/Assets increased to 0.19 from 0.14, while Assets/Equity decreased to 1.63 from 1.74. The stock has had a good month, gaining 12.76%.

2. MeadWestvaco Corporation (MWV): Provides packaging solutions to the healthcare, personal care and beauty, food, beverage, home and garden, tobacco, and commercial print industries worldwide. Market cap of $4.55B. Dividend yield at 3.75%, payout ratio at 49.05%. Earnings to be announced on 10/26. MRQ Net Profit Margin increased to 5.72% from 3.50% year-over-year, Sales/Assets increased to 0.1731 from 0.1659, while Assets/Equity decreased to 2.58 from 2.75. The stock has gained 8.82% over the last year.

3. The Dow Chemical Company (DOW): Manufactures and supplies products used as raw materials in the production of customer products and services worldwide. Market cap of $31.41B. Dividend yield at 3.76%, payout ratio at 31.29%. Earnings to be announced on 10/27. MRQ Net Profit Margin increased to 6.65% from 4.78% year-over-year, Sales/Assets increased to 0.23 from 0.21, while Assets/Equity decreased to 2.83 from 3.15. This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has lost 9.65% over the last year.

4. NextEra Energy, Inc. (NYSE:NEE): Engages in the generation, transmission, distribution, and sale of electric energy in the United States and Canada. Market cap of $23.10B. Dividend yield at 4.02%, payout ratio at 48.28%. Earnings to be announced on 10/24. MRQ Net Profit Margin increased to 14.64% from 11.61% year-over-year, Sales/Assets increased to 0.0726 from 0.0701, while Assets/Equity decreased to 3.66 from 3.79. Relatively low correlation to the market (beta = 0.58), which may be appealing to risk averse investors. The stock has gained 1.65% over the last year.

5. Eastman Chemical Co. (NYSE:EMN): Engages in the manufacture and sale of chemicals, plastics, and fibers in the United States and internationally. Market cap of $5.07B. Dividend yield at 2.88%, payout ratio at 23.12%. Earnings to be announced on 10/27. MRQ Net Profit Margin increased to 11.19% from 9.85% year-over-year, Sales/Assets increased to 0.31 from 0.26, while Assets/Equity decreased to 3.21 from 3.46. The stock has lost 6.49% over the last year.

6. Eaton Corporation (NYSE:ETN): Operates as a power management company worldwide. Market cap of $14.27B. Dividend yield at 3.25%, payout ratio at 36.55%. Earnings to be announced on 10/24. MRQ Net Profit Margin increased to 8.22% from 6.69% year-over-year, Sales/Assets increased to 0.23 from 0.21, while Assets/Equity decreased to 2.22 from 2.42. The stock has recently rebounded, and is currently trading 9.81% above its SMA20 and 6.07% above its SMA50. However, the stock still trades -13.1% below its SMA200. The stock has lost 1.04% over the last year.

7. Wisconsin Energy Corp. (NYSE:WEC): Engages in the generation, distribution, and sale of electric energy and steam. Market cap of $7.55B. Dividend yield at 3.22%, payout ratio at 42.43%. Earnings to be announced on 10/27. MRQ Net Profit Margin increased to 11.04% from 9.96% year-over-year, Sales/Assets increased to 0.08 from 0.07, while Assets/Equity decreased to 3.29 from 3.42. Relatively low correlation to the market (beta = 0.34), which may be appealing to risk averse investors. The stock has gained 12.14% over the last year.

8. T. Rowe Price Group, Inc. (NASDAQ:TROW): A publicly owned asset management holding company. Market cap of $13.51B. Dividend yield at 2.35%, payout ratio at 39.61%. Earnings to be announced on 10/25. MRQ Net Profit Margin increased to 28.65% from 27.41% year-over-year, Sales/Assets increased to 0.18 from 0.17, while Assets/Equity decreased to 1.14 from 1.15. The stock has gained 1.76% over the last year.

9. The Interpublic Group of Companies, Inc. (NYSE:IPG): Provides advertising and marketing services worldwide. Market cap of $3.86B. Dividend yield at 2.98%, payout ratio at 30.03%. Earnings to be announced on 10/28. MRQ Net Profit Margin increased to 6.01% from 5.12% year-over-year, Sales/Assets increased to 0.1415 from 0.1377 while Assets/Equity decreased to 4.99 from 5.39. The stock has lost 22.43% over the last year.

10. Caterpillar Inc. (NYSE:CAT): Manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. Market cap of $53.99B. Dividend yield at 2.20%, payout ratio at 27.95%. Earnings to be announced on 10/24. MRQ Net Profit Margin increased to 7.13% from 6.79% year-over-year, Sales/Assets increased to 0.19 from 0.18, while Assets/Equity decreased to 5.50 from 6.40. The stock has gained 5.99% over the last year.

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

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