6 Undervalued Dividend Stocks With Strong Sources Of Profitability

Do you prefer stocks that pay handsome dividend income? For a closer look at dividend-yielding names, we ran a screen. We began by screening stocks paying dividend yields above 2% and sustainable payout ratios below 50%. We then screened for those that appear undervalued relative to earnings growth, with PEG below 1. Finally, we ran DuPont analysis on these stocks to find those with strong sources of profitability over the last year. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components: ROE = (Net Profit/Equity) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity) = (Net Profit margin)*(Asset turnover)*(Leverage ratio) Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these 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) Those companies that... Read more