7 Low Debt Dividend Stocks With Encouraging Dupont Breakdowns

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Do you prefer stocks that offer both dividend income and the real possibility of capital gains? You might be interested in our list below:

We began by screening for low-debt dividend stocks: those paying dividend yields above 1%, with sustainable payout ratios below 50%, and debt-to-equity ratios below 0.1.

Profitability is a very important consideration when choosing among dividend stocks. If you want to be able to rely on a company's dividend, be sure that the company's profits are also reliable. With this in mind we then analyzed sources of profitability using the DuPont formula.

The DuPont formula uses return on equity (ROE) for its profitability measurement. The higher the ROE the more profitable the company appears, but this profitability can come from many sources - some better than others.

In general, an encouraging DuPont breakdown implies one or more of the following:

-Improving Net Profit Margin, i.e. higher Net Income/ Revenues
-Improving Asset Efficiency, i.e. higher Sales/Assets
-Decreasing Financial Leverage ratio, i.e. lower Assets/Equity

Companies passing all requirements are thus experiencing increasing profits due to operations and not to increased use of leverage.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research. (click to enlarge)

Tool provided by Kapitall (www.kapitall.com).

As a recap, these names have:

- Low debt: Total Debt / Equity ratio <.1

- Dividend yields between 1% and 7%, and sustainable payout ratios below 50%.

- Encouraging DuPont Breakdowns

- Market caps above $300 million

Do you think these stocks pay reliable dividends? Use this list as a starting-off point for your own analysis.

1. Arbitron Inc. (ARB): Provides media and marketing information services in the United States and internationally. Market cap at $995.55M, most recent closing price at $38.10. Dividend yield: 1.05%. Payout ratio: 18.85%. Total Debt/Equity: 0. MRQ net profit margin at 9.54% vs. 7.92% y/y. MRQ sales/assets at 0.471 vs. 0.453 y/y. MRQ assets/equity at 2.058 vs. 2.06 y/y.

2. Forward Air Corp. (FWRD): Provides time-definite surface transportation and related logistics services to the North American deferred air freight market. Market cap at $1.07B, most recent closing price at $36.58. Dividend yield: 1.12%. Payout ratio: 15.52%. Total Debt/Equity: 0. MRQ net profit margin at 9.55% vs. 9.06% y/y. MRQ sales/assets at 0.4 vs. 0.345 y/y. MRQ assets/equity at 1.163 vs. 1.355 y/y.

3. Lincoln Electric Holdings Inc. (LECO): Through its subsidiaries, manufactures welding and cutting products worldwide. Market cap at $3.51B, most recent closing price at $42.08. Dividend yield: 1.63%. Payout ratio: 22.84%. Total Debt/Equity: 0.02. MRQ net profit margin at 8.91% vs. 8.15% y/y. MRQ sales/assets at 0.368 vs. 0.349 y/y. MRQ assets/equity at 1.598 vs. 1.599 y/y.

4. Resources Connection Inc. (RECN): Provides professional services in provides finance, accounting, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, actuarial, and legal and regulatory services in support of client-led projects and initiatives. Market cap at $535.79M, most recent closing price at $12.76. Dividend yield: 1.84%. Payout ratio: 20.87%. Total Debt/Equity: 0. MRQ net profit margin at 6.11% vs. 3.71% y/y. MRQ sales/assets at 0.338 vs. 0.306 y/y. MRQ assets/equity at 1.177 vs. 1.278 y/y.

5. Inter Parfums Inc. (IPAR): Engages in the manufacture, marketing, and distribution of various fragrances and fragrance related products primarily in the United States and Europe. Market cap at $505.63M, most recent closing price at $16.54. Dividend yield: 1.9%. Payout ratio: 27.11%. Total Debt/Equity: 0.02. MRQ net profit margin at 4.13% vs. 4.12% y/y. MRQ sales/assets at 0.304 vs. 0.241 y/y. MRQ assets/equity at 1.807 vs. 1.892 y/y.

6. Exxon Mobil Corporation (XOM): Engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. Market cap at $413.36B, most recent closing price at $89.55. Dividend yield: 2.5%. Payout ratio: 20.85%. Total Debt/Equity: 0.1. MRQ net profit margin at 12.49% vs. 8.51% y/y. MRQ sales/assets at 0.386 vs. 0.385 y/y. MRQ assets/equity at 2.025 vs. 2.097 y/y.

7. NL Industries Inc. (NL): Operates in the component products industry in the United States, Canada, and Taiwan. Market cap at $568.95M, most recent closing price at $11.69. Dividend yield: 4.3%. Payout ratio: 25.72%. Total Debt/Equity: 0.08. MRQ net profit margin at 69.07% vs. 48.01% y/y. MRQ sales/assets at 0.055 vs. 0.05 y/y. MRQ assets/equity at 1.858 vs. 1.927 y/y.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: http://seekingalpha.com/article/867851-7-low-debt-dividend-stocks-with-encouraging-dupont-breakdowns?source=feed

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