Here is a list of 15 large cap stocks I ran a screen on this morning. All have double digit returns on equity (REO), free cash flow, a current P/E under 15, and a dividend yield above 3%.
*The definition of a large cap can vary, but generally it is a company with a market capitalization above 5 billion.
Author suggests further research before investing.
Full Disclosure: Author has position in UTX at time of writing.
In the list below you will find 5 small Cap companies Buckle (BKE), Lufkin Industries (LUFK), Raven Industries (RAVN), NutriSystem (NTRI), and Columbia Sportswear Company (COLM). All five have a long history ranging from the newest NutriSystem which has been doing business for 37 years to Lufkin which has been around for over 100 years. All five companies have very little to no debt at all which is important especially in a slower economy. All five have had positive earnings growth for the last five years with strong free cash flow. All five sport a nice dividend which is also a bonus in uncertain times.
Buckle Inc was founded in 1948 and is headquartered in Kearney, Nebraska. The Buckle operates as a retailer of casual apparel, footwear, and accessories for young men and women in the United States.
Lufkin Industries was founded in 1902 and is based in Lufkin, Texas. Lufkin Industries and its subsidiaries manufacture and sell oil field pumping units and power transmission products worldwide. It operates in two segments, Oil Field and Power Transmission.
Raven Industries was founded in 1956 and is headquartered in Sioux Falls, South Dakota. Raven Industries together with its subsidiaries, manufactures various products for industrial, agricultural, construction, and military/aerospace markets in North America. The company operates in four segments: Applied Technology, Engineered Films, Electronic Systems, and Aerostar International, Inc. (Aerostar).
NutriSystem Inc was founded in 1972 and is based in Horsham, Pennsylvania. NutriSystem provides weight management products and services in the United States and Canada. Its weight management program includes primarily of a pre-packaged food program and counseling.
Columbia Sportswear Company was founded in 1938 and is headquartered in Portland, Oregon. Columbia Sportswear engages in the design, sourcing, marketing, and distribution of outdoor apparel, footwear, and related accessories and equipment in the United States, Canada, Europe, the Middle East, Africa, Latin America, and Asia Pacific. The company categorizes its products in four categories: outerwear, footwear, sportswear, and related accessories and equipment.
*The definition of small cap can vary, but generally it is a company with a market capitalization of between $300 million and $2 billion.
Here are three companies that currently offer a nice dividend payout. All three have market caps over 2 billion dollars and trade at a reasonable price/earnings multiple. All three do not have any debt on the balance sheet according to the ending quarter.
1. Garmin Ltd. (GRMN) Has a 3.8 % yield with 938 million in cash and free cash flow of 534 million.
2. Paychex, Inc. (PAYX) Has a 4.7% yield with 489 million in cash and free cash flow of 607 million.
3. Interactive Data Corp. (IDC) Has a 3.5% yield with 244 million in cash and free cash flow of 150 million.
*Free cash flow is the amount of cash that a company has left over after it has paid all of its expenses, including investments. While free cash flow doesn’t receive as much media coverage as earnings do, it is considered by some experts to be a better indicator of a company’s financial health.
Author currently has no positions in securities mentioned
For those of you living in the United Kingdom here is a nice suprise!
When everyone else is cutting their dividends, Vodafone goes against the flow with a small but welcome raise.
The economic downturn has hit Vodafone (LSE: VOD) just like the rest of its competition, including BT Group (LE: BT-A), as reported last week. As consumers tighten their belts and reduce their discretionary spending, new 3G phone contracts, expensive mobile web surfing, and spending all day texting, are the kinds of things that people can easily cut back on.
To that end, in full-year results released this morning, Vodafone has announced plans to cut costs more aggressively than previously anticipated, and is now aiming to save around £650m by March 2010, up from its earlier £500m target. Longer term the company is aiming at £1bn in cost reductions, which is in line with the cuts that BT is trying to achieve. That’s a demanding target, and whether Vodafone will be able to meet it without turning to redundancies, as BT is doing, remains to be seen.
After taking a painful £5.9b write-down against a poor performance in Spain, Vodafone recorded pre-tax profits of £4.2b, which is less than half of last year’s £9.2b.
That came from revenues that were up 15% to £41b in sterling terms, but that was almost entirely due to changes in currency exchange rates, with the strength of the euro playing a significant role. Adjusted for currency fluctuations, underlying revenue growth came in at a pretty flat 1.3%.
That all-important measure in tough economic times, free cash flow, remains strong at £5.7b, even if that is a bit flat — it’s a rise of just 2.5% in sterling terms, and probably a small fall once exchange rates are taken into account.
In the words of Chief Executive Vittorio Colao, describing his first full-year results since he took charge:
“These results demonstrate the impact of the early actions we took to address the current economic conditions and highlight the benefits of our geographic diversity. The business continues to generate cash strongly and we have made good progress in implementing the strategy announced in November. Data revenue grew to £3 billion for the year and our broadband and enterprise businesses continue to perform well. Our £1 billion cost reduction programme is ahead of plan and we continue to explore further ways to reduce cost. We maintain our tight focus on capital discipline and returns to shareholders”
That tight focus on returns to shareholders appears to be holding up, as the company went against the tide of some of the dividend-investors’ favourites — including BT last week andMarks & Spencer (LSE: MKS) today — who are slashing dividends.
Vodafone’s final dividend is pencilled in at 5.2p, providing a full year dividend of 7.77p, which is up 3.5% from last year. Against the share price at the time of writing of 127p, that’s a dividend yield of 6%, and to maintain that in such times is good going.
The company declined to make any revenue predictions for 2009-10, but did tell us that it is unlikely to beat this year’s adjusted operating profit of £11.8b. Free cash flow forecasts suggest something in the £6b to £6.5b range, which would be nicely ahead of this year’s figure.
Growth in European markets is going to be hard to achieve, as those markets reach maturity. There will be plenty of technological change happening in coming years, but there are few people left who do not have some sort of mobile communications device, and most people are pretty much at the limits of what they want to spend every month.
Spain is a particularly volatile market, as it has a greater proportion of “Pay as you go” subscribers who can more easily cut their spending. Should the recession continue much longer, we might start seeing people in other countries ditching their existing contracts in order to save cash.
To counter this long term European slowdown, Vodafone is continuing with its policy of targeting emerging markets, and told us that results from Africa and India were strong.
If the company can continue to weather the economic storm, successfully pursue growth in emerging markets, and keep the cash flow going, I think that 6% might be one of the more reliable dividend yields to be had these days.