Income Screen For July 2016
The results of ValueWalk’s income screen for July.
Winvestor uses financial data from Thomson Reuters to identify undervalued, profitable gems that every investor is looking for.
The site’s ‘Profit Ranking’ is great proxy screen for dividend sustainability. The screen is proprietary, but Winvestor does reveal that the tool screens the market using more than ten different profitability criteria and then arrives at a final score somewhere in the range of 0 to 100.
To gain the best possible understanding of the company’s financial performance, the profit screen assesses several different measures of corporate profitability, including profit margins, cash flow ratios and investment returns. Companies that gain a rank of 100 from the screen have the most sustainable profit margins and generate the best returns on invested capital — to name just two screen criteria.
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Income screen: Financial health
Along with growth, Winvestor includes a screen for the best financial health. Once again, this ranking includes a number of different screening criteria, including debt, or solvency ratios and working capital ratios, including but not limited to the current ratio and cash conversion cycle. Each company is given a financial ‘Health Rank’ between 0 to 100 and ranked accordingly.
A combination of these two screens is a great proxy for dividend sustainability. A strong balance sheet and wide profit margins are two key factors that are required for companies to become dividend champions.
Winvestor’s screens cover a universe of over 38,000 companies in 130 countries (representing over 99% of world market capitalization). However, to try and root out the best opportunities for investors, in this article the screen has been limited to US corporations with a market capitalization of $2 billion or more.
The top 10 companies with the highest Profit Rank are shown below. Financial stocks are excluded. All companies have a current dividend yield of 3% or more and a shareholder yield (which includes the effect cash dividends, stock repurchases and debt reduction) of more than 4%. These are the results of the screen as of before market open 07/29/2016.
(click to enlarge)