What are we looking for?
Attractively valued U.S. securities generating earnings per share and free cash flow growth that are strong enough to deliver sustainable dividends and dividend growth.
We screen for companies providing a sustainable and consistent income stream with the potential to grow dividends while maintaining the versatility needed to invest in their business through production expansion, developing new products, or reducing debt. Our goal is not only to find stocks paying attractive yields, but ones capable of growing their dividend while maintaining or reducing their payout ratios.
Our screen is based on the following criteria:
- Price-to-earnings ratio less than the S&P 500 (the index’s ratio is 23.3);
- Dividend yield greater than the S&P 500 (the index’s yield is 2.2 per cent);
- Projected one-year dividend growth greater than or equal to the S&P 500 (the index’s forecasted, market-cap-weighted dividend growth rate is 1.6 per cent);
- Free cash flow yield must be greater than dividend yield (in other words, operating cash flows after accounting for capital expenditures are greater than the amount needed to sustain current dividends);
- Projected one-year earnings growth must be greater than projected one-year dividend growth.
More about Thomson Reuters
Thomson Reuters delivers trusted news and intelligent information to more than one billion people in 140 countries every day. Our content, software and technology support the way professionals work in a rapidly changing, ever more complex world. Thomson Reuters Eikon is the platform used by financial and corporate clients to access top research, portfolio analytics, charting and screening for every asset class.
What did we find?
Results have been limited to securities with a market cap greater than $1-billion (U.S.). The screen highlights companies that have met the above criteria, ranked by market cap, with Altria Group Inc., Medtronic PLC and HP Inc. leading the pack.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Khaled Eniba works in the financial and risk unit of Thomson Reuters and specializes in banking and research.
Select U.S. securities
|Company||Ticker||Market Cap ($Mil U.S.)||P/E||Free Cash Flow Yield||Projected Earnings Growth||Dividend Yield||Projected Dividend Growth|
|Altria Group Inc.||MO-N||136,722||9.0||7.9%||8.4%||3.7%||5.3%|
|SunTrust Banks Inc.||STI-N||30,761||16.6||5.3%||12.8%||2.5%||12.3%|
|Principal Financial Group Inc.||PFG-N||20,655||11.7||6.3%||14.7%||2.7%||3.0%|
|Omnicom Group Inc.||OMC-N||17,161||14.8||5.1%||7.1%||3.3%||2.0%|
|Huntington Bancshares Inc.||HBAN-Q||15,803||17.6||4.4%||32.7%||3.0%||12.3%|
|Eastman Chemical Co.||EMN-N||13,339||13.5||4.6%||4.3%||2.4%||2.4%|
|First Hawaiian Inc.||FHB-Q||4,136||18.1||3.8%||5.0%||3.0%||2.3%|
|Legg Mason Inc.||LM-N||3,718||15.8||6.8%||28.6%||2.8%||20.5%|
|Fulton Financial Corp.||FULT-Q||3,123||17.4||3.5%||14.0%||2.4%||4.8%|
|First Interstate BancSystem Inc.||FIBK-Q||2,222||19.7||2.5%||10.8%||2.4%||2.1%|
|Provident Financial Services Inc.||PFS-N||1,796||17.9||3.2%||12.1%||3.0%||2.4%|
|First Financial Bancorp||FFBC-Q||1,694||17.8||3.5%||9.1%||2.5%||2.4%|
|Union Bankshares Corp.||UBSH-Q||1,565||19.9||3.9%||2.9%||2.3%||1.7%|
|Boston Private Financial Holdings Inc.||BPFH-Q||1,312||19.7||3.2%||3.8%||2.8%||2.3%|
Source: Thomson Reuters Eikon