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20 Companies With Safe Dividends?

Thursday, 14 Apr 2011 | 7:36 AM ET

Dividend paying stocks are usually favored by value investors, who seek to limit any potential pullback in the market by locking in dividend income.

A screen of the S&P 1500, which includes large, mid and small-cap stocks, reveals that about 212 companies have increased dividend payments since the beginning of the year.

But just as a company may reward investors with a dividend increase, it may also decide to reduce or even eliminate its dividend payment during uncertain economic times.

So how can investors determine if a company may be able to sustain its dividend? One of the metrics used is the earnings payout ratio (dividends per share / earnings per share), but due to certain adjustments in net income, those numbers may not always be reliable.

Instead, dividend investors tend to focus on the free cash flow payout ratio, which takes into account cash flow, a measure much harder to manipulate.

Here is a look at some of the companies in the S&P 1500 that have increased dividend payments in recent months, have a yield greater than 2.5 percent, a free cash flow payout ratio less than 60 percent, and are in positive territory year-to-date.


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