3 Interesting Dividend Stocks With Low Debt-To-Equity Ratios
Published Thu, 03 Mar 2016 23:45 CET by DividendYields.orgThe strength of dividend investing is that investors can build a portfolio of high quality dividend stocks over the long-term and rely on this steady income. The longer a company pays a dividend, the more a portfolio continues to grow regardless of how depressive or fluctuating the stock market is. Dividend investing is not a get-rich-quick scheme, but it rather guarantees safer investments in dividend-paying stocks in the long run.
This article discusses three companies, one mid-cap and two large-caps, that trade in different industries, namely the Industrial Equipment industry, and the Waste Management industry. The two companies in the Industrial Equipment industry are affected by the tough business conditions, yet they have managed to deliver strong operating results as well as sustained dividend payments. The average debt-to-equity ratio of all three companies is way below 2, just 0.75, suggesting effective debt management, whereas their average beta is 1.07, which suggests safe investments.
Dover (NYSE: DOV) engages in the manufacture and sale of industrial equipment and components as well as support services both in the United States and internationally. Through its Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment segments, Dover provides its customers a range of industrial solutions related to the production and processing of oil, natural gas liquids, bearings and compression, automation end markets. soldering and dispensing equipment, linear mechanical indexers, refrigeration systems, and more. Dover was founded in 1947 and is headquartered in Downers Grove, Illinois.
FY 2015 Results: Full year 2015 results for Dover have been impacted by tough business conditions, especially in oil and gas markets. More specifically the company’s revenues declined 10.3% YoY to $6.96 billion from $7.75 billion in the same period last year, generating a gross profit margin of 37.2% from 38.6%. On the upside, operating expenses were down 7.7% YoY to $6.03 billion to $6.54 billion as well as net income that reached $870 million, up 12.2% YoY from $775.2 million. Yet, operating income was down 24% YoY to $924.4 million from $1.2 billion in FY 2014. Furthermore, the company has a strong debt-to-equity ratio of 0.72.
Dividend Strength: Dover delivers an annualized dividend of $1.68 per share, yielding 2.70% at a payout ratio of 31%. The company’s dividend growth for the period 2000-2015 is 236% or 15.7% annually, indicating that Dover is consistently delivering income to its shareholders in the form of dividend. It also raises its dividend payments annually.
Parker-Hannifin (NYSE: PH) is a global leader in the manufacture and sale of motion and control technologies for mobile, industrial, and aerospace markets across the world. Through its Diversified Industrial and Aerospace Systems segments, Parker-Hannifin provides systems and diagnostic solutions to observe and eliminate air, water, and fuel pollution as well as components for industrial use, mobile machinery, refrigerators, commercial and military airframe. Parker-Hannifin was founded in 1918 and is headquartered in Cleveland, Ohio.
Q2 2016 Results: Parker-Hannifin has taken careful action in managing costs and anticipate the global market conditions. The company’s revenues have been impacted by sustained weakness in natural resource markets, but it has managed to deliver a solid margin performance. Furthermore, the company is executing a range of restructuring actions and has made significant progress towards the reduction of complexity and costs and increase of speed in customer service. More specifically, compared to Q2 2015, Parker-Hannifin results for Q2 2016 are as follows:
- Revenues $2.71 billion, down 13.7% YoY from $3.13 billion
- Gross profit margin 21.6% from 23.6%
- Operating expenses $2.48 billion, down 11.3% YoY from $2.79 billion
- Operating income down 33% YoY to 229.9 million from $343.3 million
- Net income down 31.5% YoY to $183 million from $267.3 million
- Debt-to-equity ratio 0.57
Dividend History: Parker-Hannifin has declared an annualized dividend of $2.52 per share, yielding 2.41% at a payout ratio of 42%. The company’s dividend growth for the period 2000-2015 is 270.6% or 18.0% annually, indicating that Parker-Hannifin is consistently delivering strong dividends.
|Name||Price ($)||52 wk low||52 wk high||52 wk low %||52 wk high %||Market Cap ($ b)||P/E||D/E||Beta||Payout Ratio|
Republic Services (NYSE: RSG) is a Phoenix, Arizona-based company that was founded in 1996 and provides waste management services through its subsidiaries to retail, industrial and residential customers across the United States and Puerto Rico. Republic Services has a current network of 340 collection operations, 201 transfer stations, 193 active landfills, 69 landfill gas and renewable energy projects, 67 recycling centers, 12 salt water disposal wells, and 8 treatment, recovery, and disposal facilities.
Financial Health: Republic Services is a financially healthy company with strong fundamentals. The company’s debt-to-equity ratio is 0.97 suggesting effective debt management with average dependence on debt financing. In terms of financial results, for the fiscal year 2015, Republic Services reported revenues of $9.16 billion, up 3.7% YoY from $8.79 billion in the same period last year, generating a gross profit margin of 39.5% from 36.0%. Operating expenses remained in line $7.56 billion, whereas operating income increased 26.6% YoY to $1.56 billion from $1.23 billion and net income increased 36.9% YoY to $750 million from $548 million in fiscal year 2014.
Dividend Policy: In terms of dividend growth, Republic Services consistently delivers a dividend since 2003 with 400% growth in the period 2003-2015 or 33.3% annually, whereas its annualized dividend is $1.20 per share, yielding 2.58% at a payout ratio of 56%.
Future Outlook: Republic Services is currently trading very close to its 52wk high and it is the only company out of the three discussed in this article that has outperformed the NYSE Index by 13.85% YoY. Analysts expect an average earnings growth rate of 12% annually through 2020.
|Stock name||Dividend Yield|