When a dividend stock generates very high yields, it puts bonus money in the investor's pocket. These companies are especially attractive to the savvy investor, especially when you add in the appealing attributes of profit generating and well funded. Today we put together a small list of dividend stocks that have these key components. We think you will find the list we came up well worth your time.
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.
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 Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for stocks with a very high yield (more than 5%). We next screened for businesses with strong profit margins (1-year operating margin>15%)(ROA [TTM]>10%). From here, we then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps or sectors.
Do you think these stocks can offer attractive returns? Use our list along with your own analysis.
1) Chunghwa Telecom Co., Ltd. (NYSE:CHT)
|Industry:||Telecom Services - Domestic|
Chunghwa Telecom Co. Ltd. has a Dividend Yield of 6.18%, a Payout Ratio of 88.89%, an Operating Profit Margin of 27.42%, a Return on Assets of 10.81%, a Current Ratio of 2.22, and a Quick Ratio of 2.11. The short interest was 0.53% as of July 30, 2012. 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 (MOD), 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 also sells mobile handsets and data cards; and leases real estate properties.
2) CVR Partners, LP (NYSE:UAN)
CVR Partners, LP has a Dividend Yield of 9.15%, a Payout Ratio of 78.40%, an Operating Profit Margin of 46.59%, a Return on Assets of 25.69%, a Current Ratio of 4.95, and a Quick Ratio of 4.52. The short interest was 1.93% as of July 30, 2012. CVR Partners, LP engages in the production, distribution, and marketing of nitrogen fertilizers in North America. Its nitrogen fertilizer products include ammonia and urea ammonium nitrate. The company was founded in 2007 and is based in Sugar Land, Texas.
3) Southern Copper Corp. (NYSE:SCCO)
Southern Copper Corp. has a Dividend Yield of 6.39%, a Payout Ratio of 82.37%, an Operating Profit Margin of 54.64%, a Return on Assets of 29.91%, a Current Ratio of 3.56, and a Quick Ratio of 2.92. The short interest was 6.55% as of July 30, 2012. Southern Copper Corporation engages in mining, exploring, producing, smelting, and refining copper and other minerals in Peru, Mexico, and Chile.
It is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce anode copper; and refining of anode copper to produce copper cathodes, as well as refined silver. The company operates Toquepala and Cuajone mines in the Andes Mountains located to the southeast of the city of Lima, Peru, as well as a smelter and refinery in the coastal city of Ilo, Peru. It also operates La Caridad and Buenavista copper mines, and smelting and refining plants in Mexico.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.