13 Dividend Champions With Very Low Debt-To-Equity Ratios
Dividend Yield | Apr 05, 2013 06:09AM ET
I believe that I don’t need a bigger return when I invest in historically safe stocks. In this way I try to avoid the real big risks of investing. Every cent I don’t lose with my current holdings is also a cent that I don’t need to earn back with other stocks. That's my philosophy.
A real problem that affects a stock's price is the company's debt situation. While most people only talk about growth and future potential, I look at these ratios as well as the company's abilities to repay any outstanding debt. Remember, as a shareholder, you get your dividends after loan and interest repayments.
Debt overloaded stocks sometimes need decades to reduce their debt if they operate in a non growth industry. Therefore, stocks with a bigger cash holding are, in my view, the better alternative. These companies have more growth possibilities and if they don’t find ways to invest their money, they can repurchase their own shares or boost their current dividend.
Today, I'm focussing on some of the best dividend growth stocks with a very long dividend growth history and a very low leverage risk. I selected 109 Dividend Champions and screened them for a debt-to-equity ratio of less than 0.1. Thirteen stocks popped up, of which seven have a buy or better ratio.
Chevron Corporation (CVX) has a market capitalization of $229.37 billion. The company employs 62,000 people, generates revenue of $241.909 billion and has a net income of $26.336 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $59.745 billion. The EBITDA margin is 24.70 percent (the operating margin is 19.15 percent and the net profit margin 10.89 percent).
Financial Analysis: The total debt represents 5.23 percent of the company’s assets and the total debt in relation to the equity amounts to 8.93 percent. Due to the financial situation, a return on equity of 20.30 percent was realized. Twelve trailing months earnings per share reached a value of $13.32. Last fiscal year, the company paid $3.51 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 8.86, the P/S ratio is 0.95 and the P/B ratio is finally 1.68. The dividend yield amounts to 3.05 percent and the beta ratio has a value of 0.77.
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Automatic Data Processing (ADP) has a market capitalization of $31.42 billion. The company employs 57,000 people, generates revenue of $10.665 billion and has a net income of $1.388 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2.343 billion. The EBITDA margin is 21.97 percent (the operating margin is 19.90 percent and the net profit margin 13.02 percent).
Financial Analysis: The total debt represents 0.05 percent of the company’s assets and the total debt in relation to the equity amounts to 0.27 percent. Due to the financial situation, a return on equity of 22.90 percent was realized. Twelve trailing months earnings per share reached a value of $2.79. Last fiscal year, the company paid $1.55 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 23.23, the P/S ratio is 2.94 and the P/B ratio is finally 5.13. The dividend yield amounts to 2.69 percent and the beta ratio has a value of 0.67.
Hormel Foods (HRL) has a market capitalization of $10.71 billion. The company employs 19,700 people, generates revenue of $8.230 billion and has a net income of $504.96 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $845.48 million. The EBITDA margin is 10.27 percent (the operating margin is 9.29 percent and the net profit margin 6.14 percent).
Financial Analysis: The total debt represents 5.48 percent of the company’s assets and the total debt in relation to the equity amounts to 8.87 percent. Due to the financial situation, a return on equity of 18.26 percent was realized. Twelve trailing months earnings per share reached a value of $1.87. Last fiscal year, the company paid $0.60 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 21.68, the P/S ratio is 1.30 and the P/B ratio is finally 3.77. The dividend yield amounts to 1.68 percent and the beta ratio has a value of 0.52.
Take a closer look at the full list of Dividend Champions with low debt. The average P/E ratio amounts to 21.39 and forward P/E ratio is 17.46. The dividend yield has a value of 2.41 percent. Price to book ratio is 3.09 and price to sales ratio 2.30. The operating margin amounts to 16.94 percent and the beta ratio is 0.82. Stocks from the list have an average debt to equity ratio of 0.04.
Here is the full table with some fundamentals (TTM):
Related stock ticker symbols:
MCY, BWL-A, CVX, ADP, XOM, TROW, LANC, HRL, GRC, RAVN, TR, CLC, HP
Disclosure: I am long ADP. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.
For the other stocks: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.
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