Dividends and Steady stocks that can weather a downturn

In the last column it was recommend to ensure your portfolio has profitable stocks, about the same time Ian Tam of Morningstar Research looked for profitable stocks and his criteria was:

S&P 500 companies

10 year average return on equity (ROE)

10 year earnings per share growth rate (EPS)

10 year deviation of ROE and EPS  lower figures are better

Dividend yield of 2.4% or higher and the payout ratio must be less than 80% on expected earnings or 60% on operating cash flows to ensure dividends are reasonable sustainable

Company              Mkt Cap    10 Yr Ave 10 Yr dev  10 Yr EPS  10 Yr dev  Div        Payout on

bil$              ROE          ROE           Growth       EPS       Yield  For EPS Op CF

Xcel Energy         29.737        10.3            0.4              5.5               2.5          2.8        62.1      24.5

Consol Edison    28.631           9.0             0.4              3.1               3.3         3.4        68.0      28.6

Southern Com     56.384         12.8           0.6               3.4               3.8         4.6        81.6      45.5

American Elec     42.953         10.5          0.5                3.3               4.5         3.1       65.0        27.0

JM Smucker          14.172        10.6           0.6               5.5               3.7         2.7       40.5        34.3

P&G                     262.568         17.7          1.2                1.0               3.8        2.9     63.0     51.4

CH Robinson        10.957         37.8          5.0               7.7                8.4        2.5     40.3  31.4

Paychex                 30.677        38.2           3.4              7.9                6.4        2.9      80.0   55.5

AT&T                   229.741         25.2           3.5              6.5                5.4        2.8      44.1   44.4

The other companies on the list were J&J, T Rowe Price, Cisco, Snap-On, Packaging Corp of America, Foot Locker

Linking to dividend paying stocks, one may notice a number of the companies are utilities which are great defensive companies and you should own at least one of them. If you are going to own list such as these help make the alternatives on a very good list to pick. If you do buy them every year you can look at the ROE and EPS to ensure your dividends are safe and whether you should keep the stock for another year.

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

 

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