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Globe Investor

Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Number Cruncher

Where ‘debt’ is a dirty word Add to ...

What are we looking for?

Companies with little or no debt that return cash to shareholders.

There’s renewed focus this week on heavy debt loads, following Standard & Poor’s revision of its long-term outlook on U.S. debt from “stable” to “negative.” Adding to concerns, there’s also the issue of the country’s debt ceiling. The U.S. government risks defaulting on its debt if the White House and congressional leaders can’t agree on a deal to raise the $14.3-trillion (U.S.) cap on borrowing in the next few weeks.

Luckily most U.S. and Canadian business aren’t run this way.

More about today’s screen

We scanned companies listed on the Toronto Stock Exchange that had low debt and strong dividend payouts to shareholders. Specifically, these businesses have debt-to-equity ratios of less than 10 per cent, dividend yields of 2 per cent or more and a dividend payout ratio (i.e. the percentage of earnings paid back to shareholders) of at least 30 per cent. They are ranked by dividend yield in descending order.

What we found

Not surprisingly, there are a lot of trusts near the top of the list. Their business operations include pulp and paper, newspapers, restaurants and financial services.

Among the higher yielding corporations, Chesswood Group is a small leasing company with its main operations in Toronto and Denver that has raised its dividend three times in the last year.

Calgary-based Alaris Royalty Corp. provides alternative financing to private businesses in exchange for royalties or distributions. Its principal objective is to generate stable and predictable cash flows for dividend payments.

Ottawa-based Calian Technologies provides technology-related services and MCAN Mortgage Corp., a mortgage investment company, has just raised $33.4-million that it plans to invest in single family residential mortgages, construction loans and commercial term mortgages.

Tomorrow, we will screen U.S. stocks using similar criteria.

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