Interest rates are low which if you are a borrower and have access to low rates is wonderful; it is even better if your cash flows allows to easily pay off the loans. At some point, the fed is going to raise rates or maybe it will be after the presidential election. If conditions improve in the economy, the fed will want to raise rates which will have an impact on the stock market. If you could be guaranteed a 5% plus return by buying bonds, would you move some money into bonds? The answer is likely yes. There will be a variety of reports trying to figure out which companies could be the winners and  a report by Ian Tam under the heading Stocks that Could Benefit from Rising Rates was published in the Globe and Mail. Mr. Tam works at Morningstar Research.

Thesis: US companies in interest rate sensitive sectors.

Factors: some companies do better than others – financials, consumer cyclicals, and industrials

Ranking by Yield, Cash Flow to Debt; Industry-relative debt to equity; forward p/e

Limiting Factors:  market cap must be a minimum of $6 billion, dividend payout ratio of < 80%.

Rank    Company                          Ticker          Mkt Cap    Yield   Forward  Cash Flow Industry Relative   Payout Ratio

US Bil       %             P/E           to Debt       debt to equity           %

1.     Everest Re Group               RE-N              8.101         2.08        8.83           2.05            0.24                          13

2.    T Rowe Price                       TROW-Q      20.333        2.67       16.04           n/c              0                              40.35

3.     ADP                                       ADP-Q          38.932        2.36      25.05           67.88          0                              64.88

4.     Fastenal                                FAST-Q       12.310          2.67      23.27            n/c              0                              59.95

5.     Expeditors of Wash            EPD-Q           9.173          1.5        21.56             3.49            0                                31.22

6.    Foot Locker                            FL-N             8.716          1.6         15.58            5.16             0.08                         24.2

7.    Williams-Sonoma                WSM-N          7.362         1.74       23.11             n/c              0                               41.43

8.    Robert Half Int’l                   RHI-N            7.556         1.43       20.95          368.18         0                               31.09

9.    Genuine Parts                         GPC-N         13.772        2.72       18.97           1.8                0.26                         50.43

10.   Dick’s Sporting Goods         DKS-N            6.391       1.02       16.97            9.21             0.05                         17.61

Linking to dividend paying companies, all the above pay a dividend which allows many choices to make and changing the criteria will add or subtract other companies, the important aspect is to narrow your field and pick the best of the best. There are many choices within the dividend paying companies.

There are more questions than answers, till the next time – to raising questions.