6 Strong Payout Companies

Posted by: Scott Rothbort / Lake View Asset Management, LLC

Updated:
06.28.12
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Description:

I like companies with strong cash flow. I like companies that pay above market dividends. I like companies with strong balance sheets. I like companies that generate cash. So, I decided to try to combine all of these criteria in seeking out a portfolio of stocks.

I used two criteria in my analysis:
1. Dividend Payout Ratio - this represents the amount of earnings that are paid out in the form of dividends to shareholders. We care about this because it shows that the company is focused on returning capital to shareholders. This is important if you subscribe to the Dividend Discount Model of stock valuation.
2. Debt to Market Capitalization - this is a measure of leverage but is also a measure of the strength of the balance sheet. I prefer that a company uses its operational cash flow rather than debt to pay dividends to shareholders. Hence, I sought out companies with low debt to market capitalization ratios.