Liquidity is a very important consideration for dividend stocks. Companies with higher liquidity are considered more able to continue paying dividends if profits fall. That's because the company can use its sources of liquidity such as cash and marketable securities to bridge the gap and maintain payment.
The current ratio is a measure of company's ability to pay its short-term obligations. It's calculated as current assets over current liabilities, where current assets include cash and accounts receivable, while current liabilities include accounts payable and short-term debt.
In general, a current ratio under 1 suggests that the company would be unable to pay off its obligations if profits fell. With this in mind, we ran a screen on dividend stocks (yields over 1%) with high liquidity, with current ratios over 3.
To improve the quality of our list, we further screened these stocks for those with the highest net buying from institutional investors over the current quarter. Institutions include mutual funds, hedge funds, pensions, and bank trust departments, and they often have access to more sophisticated research than the average investor.
The smart money seems optimistic about these names. Do you think they'll move higher? Use this list as a starting point for your own analysis.
List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)
1. Acorn Energy
3. EV Energy Partners
4. Keynote Systems
5. LeMaitre Vascular
6. Mueller Industries
7. Sun Hydraulics
8. Universal Forest Products
9. Western Gas Partners
10. World Wrestling Entertainment
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Institutional data sourced from Fidelity.