Investing 101: High Dividend Yield Stocks With Impressive Profitability
Do you like to rely on stocks' dividend income? Whenever a stock seems to pay a very high dividend yield, it's a sign to take a second look and find the reason why.
Dividend yield equals dividend per share/price per share, so when the stock price falls the dividend yield rises. Therefore falling dividend stocks tend to pay high dividend yields (these are referred to as "value traps"). Unfortunately, their ability to continue paying a dividend may be in jeopardy.
To find out whether a high yield company can continue paying its dividend into the future, look at its profitability.
We ran a screen with this idea in mind, searching for high dividend yield stocks with higher gross, operating, and pre-tax margins than their industry averages.
Business section: Investing ideas
Below is the final list of stocks from this screen. These high dividend yield names have high profitability, relative to their industry averages, which may contribute to a strong dividend.
Do you think these stocks pay solid dividends?
Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Deluxe (NYS: DLX) : Provides various personalized printed products, promotional products, and merchandising materials to small businesses and financial institutions in the United States, Canada, and Europe. Market cap at $1.22B.Price at $23.43.Dividend yield at 4.19%, payout ratio at 35.56%. TTM gross margin at 70.51% vs. industry average at 39.62%. TTM operating margin at 20.24% vs. industry average at 14.83%.TTM pre-tax margin at 15.24% vs. industry average at 10.64%.
2. Empire District Electric (NYS: EDE) : Primarily engages in the generation, purchase, transmission, distribution, and sale of electricity in Missouri, Kansas, Oklahoma, and Arkansas. Market cap at $862.09M.Price at $20.34.Dividend yield at 4.86%, payout ratio at 48.63%. TTM gross margin at 33.72% vs. industry average at 26.73%. TTM operating margin at 22.71% vs. industry average at 18.29%.TTM pre-tax margin at 15.47% vs. industry average at 13.58%.
3. Public Service Enterprise Group (NYS: PEG) : Operates in the energy industry primarily in the northeastern and mid Atlantic United States. Market cap at $15.50B.Price at $30.22.Dividend yield at 4.64%, payout ratio at 49.25%. TTM gross margin at 35.11% vs. industry average at 26.25%. TTM operating margin at 26.5% vs. industry average at 17.24%.TTM pre-tax margin at 21.02% vs. industry average at 12.63%.
4. Strayer Education (NAS: STRA) : Provides various academic programs through traditional classrooms and Internet. Market cap at $1.12B.Price at $93.09.Dividend yield at 4.25%, payout ratio at 46.31%. TTM gross margin at 56.89% vs. industry average at 52.36%. TTM operating margin at 28.55% vs. industry average at 20.39%.TTM pre-tax margin at 27.97% vs. industry average at 17.78%.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Profitability data sourced from Fidelity.
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