The goal of dividend investing is to find and buy dividend growth stocks that will continue to raise their dividends. To pay and raise its dividend a company must generate sufficient free cash flow. However, it is not enough to just generate the cash, it has to be available for dividend payments. Many companies generate significant free cash flow, but often that cash is already spoken for in the form of debt obligations.
This week I am screening my database for low debt-to-total-capital stocks. Debt includes both long-term and short-term debt. Total capital is a combination of debt and shareholders equity. When you divide debt by total capital a desirable rate is something less than 35%, but I will consider rates up to 50% on a short-term basis. Obviously, this is not a buy list but a potential idea list that will require additional due diligence.
Below are 13 stocks with debt that have a low debt-to-total-capital ratio:
- 9.6% Chevron Corporation (CVX) | Yield: 3.0%
- 9.1% UGI Corporation (UGI) | Yield: 3.2%
- 9.0% Exxon Mobil Corporation (XOM) | Yield: 2.2%
- 8.4% HCC Insurance Holdings Inc. (HCC) | Yield: 1.8%
- 8.2% SEI Investments Corp. (SEI) | Yield: 0.9%
- 7.2% Badger Meter, Inc. (BMI) | Yield: 1.5%
- 4.1% Intel Corporation (INTC) | Yield: 3.5%
- 4.0% UMB Financial Corporation (UMBF) | Yield: 1.9%
- 2.7% Weyco Group, Inc. (WEYS) | Yield: 3.4%
- 3.0% AFLAC Incorporated (BPL) | Yield: 2.5%
- 2.1% Clarcor Inc. Comm (CLC) | Yield: 1.0%
- 1.2% Tootsie Roll Industries Inc. (TR) | Yield: 1.1%
- 0.6% Automatic Data Processing Inc. (ADP) | Yield: 2.6%
The data present above is in its raw form. Many of the companies I would disqualify due to a low yield. However some of the others may be worth a second look.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long ADP, INTC. See a list of all my income holdings here.
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Tags: [ADP] [TR] [CLC] [AFL] [WEYS] [UMBF] [INTC] [BMI] [SEIC] [HCC] [XOM] [UGI] [CVX]
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