6 High Dividend Yield Stocks With Strong Sources of Profitability

If you are looking for sources of dividend income, keep in mind that dividends are not a guarantee of future payments. Therefore, company analysis is important to determine whether the current dividend yield will stick around. One way to analyze company profitability is by using DuPont analysis of return on equity (ROE). ROE can be broken up into three components such that changes 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.... Read more