3 Rallying, High Dividend Yield Stocks With Strong Sources of Profitability

If you are considering high dividend yield stocks as a source of income, be sure to check the company’s profitability as an indication of whether it can continue paying its high yield in the future – after all, dividends are not a guarantee of future payments. One way to check a company’s profitability is with DuPont analysis of return on equity (ROE). ROE can be broken up into three components such that increases 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... Read more