With the global economy in upheaval, many investors are ware of delving into the financial sector, regardless of its recent performance. But the investors who are willing to explore areas that other investors won't, always seem to find the smart investments before everyone else. With this idea in mind, we decided to look for financial stocks that not only have strong sources of profitability, but that are also currently paying their investors back with dividends. To only include stocks considered to be best in class, from there we narrowed our search to focus on those with ratings of 'Buy' from financial industry analysts. We came up with a short and interesting list. Take a look for yourself to see if any of these financial companies both surprise and inspire you do further research and analysis on them.
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. Also, 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 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.
We first looked for financial dividend stocks. We then looked for companies that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year operating margin>15%). We then looked for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any market caps.
Do you think these stocks have strong fundamentals? Use our screened list as a starting point for your own analysis.
1) Mesabi Trust (NYSE:MSB)
Mesabi Trust has a Dividend Yield of 9.61%, a Payout Ratio of 99.54%, a Return on Assets of 776.08%, an Operating Profit Margin of 97.02%, and an Analysts' Rating of 2.00. The short interest was 3.67% as of August 12, 2012. Mesabi Trust operates as a royalty trust in the United States. The company produces iron ore pellets. It holds interests the Peter Mitchell mine located at the eastern end of the Mesabi Iron Range, near Babbitt, Minnesota.
2) Waddell & Reed Financial Inc. (NYSE:WDR)
Waddell & Reed Financial Inc. has a Dividend Yield of 3.40%, a Payout Ratio of 48.26%, a Return on Assets of 15.44%, an Operating Profit Margin of 23.22%, and an Analysts' Rating of 2.50. The short interest was 4.72% as of August 12, 2012. Waddell & Reed Financial, Inc., through its subsidiaries, provides investment management, investment product underwriting and distribution, and shareholder services administration to mutual funds, and institutional and separately managed accounts in the United States.
The company acts as an investment adviser for institutional and other private investors, and provides sub advisory services to other investment companies; underwrites and distributes registered open-end mutual fund portfolios; distributes business partners' variable annuity products, and retirement and life insurance products to advisors channel customers; sells life insurance and disability products underwritten by various carriers; and offers fee-based asset allocation investment advisory products to advisors channel customers. It distributes investment products through independent financial advisors, broker/dealers, registered investment advisors, and various retirement platforms; and markets investment advisory services to institutional investors directly or through consultants.
3) W. P. Carey & Co. LLC (NYSE:WPC)
|Industry:||Real Estate Development|
W. P. Carey & Co. LLC has a Dividend Yield of 4.91%, a Payout Ratio of 67.64%, a Return on Assets of 10.25%, an Operating Profit Margin of 49.96%, and an Analysts' Rating of 1.00. The short interest was 0.17% as of 08/12/2012. W. P. Carey & Co. LLC, together with its subsidiaries, provides long-term sale-leaseback and build-to-suit transactions for companies worldwide and manages a global investment portfolio.
It invests primarily in commercial properties that are each triple-net leased to single corporate tenants, which requires each tenant to pay substantially all of the costs associated with operating and maintaining the property. The company also operates as an advisor to publicly owned, non-actively traded real estate investment trusts, which are sponsored by it under the Corporate Property Associates brand name, as well as invests in similar properties.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.