Dividend Growth Index Ranking

Kapitall submits:The sources of a company’s profitability are just as important a consideration as whether a company is profitable in the first place. Because profitability, as measured by return on equity, can increase simply from increased use of leverage, it is important to check the sources of profitability changes to verify that they indicate improvements in operations.

David I. Templeton submits: There tends to be much debate on whether dividends are a critical factor in determining the suitability of a particular investment. One fact is clear though and that is since 1926 the dividend component of the S&P 500 has accounted for one-third of the index's total return (click on chart to enlarge).

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By Kapitall:Profitability is a very important consideration when evaluating dividend stocks. Companies with weak profitability are less likely to be able to maintain their dividend yield. If you want to rely on a stock’s dividend, be sure to check its profitability first. We ran a screen on highly profitable stocks, beating their industry peers on gross, operating and pretax margins.

Osman Gulseven submits:There are several methods to estimate the fair value of a company. In my last article, I introduced the discounted future earnings model as a valuation tool. As Professor Donald F. Kuratko from Indiana University, Kelley School of Business, states:

By Kapitall:One important consideration for stocks is the corporate governance policies of the company, such as its board composition and shareholder rights, which have important implications to the company’s performance. RiskMetrics Group gives ratings for four areas of corporate governance, on risks related to: the board, the audit committee, the compensation committee, and shareholder rights.

By Kapitall:One important consideration for tech stocks is how easily the companies can pay their ongoing capital expenditures. Operating cash flow is a likely source for this payment, so the ratio of operating cash flow to capital expenditures can give an idea of whether the firm’s fixed asset expenses are reasonably covered, with cash to spare.We ran a screen with this idea in mind, however we also wanted to take into account profitability.

By Kapitall:Profitability is an important consideration when choosing dividend stocks. If a company’s profitability declines, its dividend may be in immediate danger of getting discontinued. Here we screened large cap dividend stocks for those that have seen at least a 15% increase in dividend per share, comparing the trailing-twelve-month dividend to the current year’s dividend per share estimate. These stocks pay sustainable dividend yields below 7% and payout ratios below 35%.