Monday, February 25, 2019

5 Dividend Stocks Yielding Over 3%, With Tiny Payout Ratios

Looking for a stock that will grow its dividend in the future and pay you handsomely now? The yield is not the only thing you need to focus on. You will also need to check the stock's Free Cash Flow Payout. This tells you how much cash the stock has left over after paying the normal operating expenses. This is the cash used to pay for acquisitions, debt obligations and dividends!

This week I am screening my database for stocks with a free cash flow payout below 40% and a dividend yield over 3%. The formula for Free Cash Flow Payout is simply Annual Dividend Per Share divided by Free Cash Flow Per Share. Free Cash Flow is Operating Cash Flow less normal capital expenditures (normally the first line in the investing section). Obviously, this is not a buy list but a potential idea list that will require additional due diligence.

Below are several stocks with debt that have a Free Cash Flow Payout less than 40% and a dividend yield over 3%:

Amgen Inc. (AMGN) is one of the world's leading biotech companies with major treatments for anemia, neutropenia, rheumatoid and psoriatic arthritis, psoriasis, cancer and osteoporosis.
FCF Payout: 38.0% | Yield: 3.1%

Cardinal Health Inc. (CAH) is one of the leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers.
FCF Payout: 25.1% | Yield: 3.4%

Wells Fargo & Company (WFC) is the fourth largest U.S. bank, by global assets, but has the largest U.S. lending footprint.
FCF Payout: 35.0% | Yield: 3.7%

Mercury General Corp. (MCY), operating primarily in California, writes a full line of automobile coverage for all classifications of risk.
FCF Payout: 37.7% | Yield: 4.6%

Abbvie Inc. (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013. AbbVie's key drug is Humira for rheumatoid arthritis.
FCF Payout: 37.4% | Yield: 5.3%

The data present above is in its raw form. Some of the the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth some additional probing.

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 ABBV, AMGN, MCY,

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- Should You Sell A Dividend Stock After A Dividend Cut?
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- 4 Dividend Stocks With Room To Increase Their Payout


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