18 Dividend Stocks With Strong Sources Of Profitability

Do you prefer stocks that pay part of their return in dividend income? For ideas on how to start your search, we ran a screen. We began by screening for dividend stocks, with dividend yields above 2% and sustainable payout ratios below 50%. We then screened these names for those with strong sources of profitability, as measured by DuPont analysis. DuPont analyzes return on equity (net income/equity) profitability by breaking ROE up into three components: ROE = (Net Profit/Equity) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity) = (Net Profit margin)*(Asset turnover)*(Leverage ratio) It therefore focuses on companies with the following positive 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 with all of these characteristics are experiencing increasing profits due to operations and not to increased use of financial leverage. Interactive Chart: Press... Read more