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My 3 Favorites from the Services Sector with Opportunities to Boost Future Dividends

Today I continue my article serial about low leveraged stocks with small payout ratios. I believe that those stocks can pay higher dividends in the future or they have the ability to grow further without capital increases.

The services sector has many corporate stocks with small dividend payouts, but the most of the stocks are working with small profit margins or they have a modest capitalization. I decided to look only at stocks with more than $2 billion market capitalization in order to get the best results. My other criteria are still the same: debt to equity under 0.5 with a dividend payout ratio of less than 20 percent.

Eighteen stocks fulfilled the above mentioned criteria of which 10 are currently recommended to buy.



Here are my favorite stocks:

TJX Companies (TJX)
has a market capitalization of $39.60 billion. The company employs 179,000 people, generates revenue of $25.878 billion and has a net income of $1.906 billion. TJX Companies’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.615 billion. The EBITDA margin is 13.97 percent (the operating margin is 11.89 percent and the net profit margin 7.37 percent).

Financial Analysis: The total debt represents 8.14 percent of TJX Companies’s assets and the total debt in relation to the equity amounts to 21.13 percent. Due to the financial situation, a return on equity of 55.47 percent was realized by TJX Companies. Twelve trailing months earnings per share reached a value of $2.72. Last fiscal year, TJX Companies paid $0.46 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 20.39, the P/S ratio is 1.56 and the P/B ratio is finally 11.13. The dividend yield amounts to 1.03 percent and the beta ratio has a value of 0.55.

PetSmart (PETM) has a market capitalization of $7.84 billion. The company employs 24,000 people, generates revenue of $6.758 billion and has a net income of $373.56 million. PetSmart’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $889.62 million. The EBITDA margin is 13.16 percent (the operating margin is 9.64 percent and the net profit margin 5.53 percent).

Financial Analysis: The total debt represents 20.74 percent of PetSmart’s assets and the total debt in relation to the equity amounts to 46.83 percent. Due to the financial situation, a return on equity of 34.21 percent was realized by PetSmart. Twelve trailing months earnings per share reached a value of $3.87. Last fiscal year, PetSmart paid $0.64 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.53, the P/S ratio is 1.17 and the P/B ratio is finally 7.12. The dividend yield amounts to 1.03 percent and the beta ratio has a value of 0.41.

FedEx (FDX) has a market capitalization of $36.00 billion. The company employs 112,000 people, generates revenue of $44.287 billion and has a net income of $1.561 billion. FedEx’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $5.538 billion. The EBITDA margin is 12.50 percent (the operating margin is 5.76 percent and the net profit margin 3.52 percent).

Financial Analysis: The total debt represents 8.91 percent of FedEx’s assets and the total debt in relation to the equity amounts to 17.19 percent. Due to the financial situation, a return on equity of 9.72 percent was realized by FedEx. Twelve trailing months earnings per share reached a value of $5.01. Last fiscal year, FedEx paid $0.56 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 22.68, the P/S ratio is 0.82 and the P/B ratio is finally 2.10. The dividend yield amounts to 0.52 percent and the beta ratio has a value of 1.35.

Family Dollar Stores (FDO) has a market capitalization of $8.12 billion. The company employs 33,000 people, generates revenue of $9.331 billion and has a net income of $422.24 million. Family Dollar Stores’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $904.10 million. The EBITDA margin is 9.69 percent (the operating margin is 7.37 percent and the net profit margin 4.53 percent).

Financial Analysis: The total debt represents 16.23 percent of Family Dollar Stores’s assets and the total debt in relation to the equity amounts to 42.19 percent. Due to the financial situation, a return on equity of 35.41 percent was realized by Family Dollar Stores. Twelve trailing months earnings per share reached a value of $3.64. Last fiscal year, Family Dollar Stores paid $0.60 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.42, the P/S ratio is 0.89 and the P/B ratio is finally 6.45. The dividend yield amounts to 1.43 percent and the beta ratio has a value of 0.30.

Take a closer look at the full list of services stocks with low dividend payout and debt ratios. The average P/E ratio amounts to 18.44 and forward P/E ratio is 15.14. The dividend yield has a value of 1.09 percent. Price to book ratio is 3.83 and price to sales ratio 1.80. The operating margin amounts to 12.64 percent and the beta ratio is 1.25. Stocks from the list have an average debt to equity ratio of 0.21.

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Related Stock Ticker Symbols:

GLNG, GSH, MGA, FDO, CHS, LUV, TJX, PETM, PIR, ROST, SIG, FDX, TW, MMS, DDS, AAP, WAB, AAN

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About the author:

Dividend
I am a private full time investor searching for investments and investment ideas.

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