From Dividend Growth Stocks:
I currently track over 220 dividend growth stocks in my D4L-Database and have determined some of the lower rated stocks could be buys if the companies simply chose to increase their dividends. For various reasons, their management has elected keep a low payout ratio and deploy the excess cash elsewhere.
To identify the companies with ample room to increase their dividend payout, I used the following criteria:
|•||A Free Cash Flow Dividend Payout (FCFp) of 40% or less. This means that 60% of the company's cash, after operating expenses, is going elsewhere.|
|•||A sum of Debt to Total Capital (Debt) + FCFp of less than 50%. This should help weed out the companies holding the cash to pay interest.|
|•||Trailing 12-month Free Cash Flow per share is greater than an average of the last 3 years. This weeds out companies where cash flow is decreasing.|
|•||Cash on the balance sheet in excess of short-term debt. This weeds out companies that may have an immediate debt-servicing need for the cash.|
|•||Yield greater than 2.5%.|
Here are seven stocks out of the 220+ that I track meeting the above criteria...
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