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A-Rated Big Names With Healthy Payouts

Posted: Oct 20, 2009 10:26 AM by Aryeh Katz

Tickers in this Article: EMR, KMB, MCD, PAYX, GPC

Some of the biggest names in the market are also sporting great fundamentals. And that's a rarity after the run-up we've seen since March. The S&P 500 has gained over 50% since that time, and the Dow only slightly less. Yet here they are: five great companies that the raters at S&P give their best marks to.

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Genuine Parts Company (NYSE:GPC) is a distributor of auto and other industrial replacement parts in the U.S., Canada and Mexico. The company's shares trade with a dividend yield of 4.1% and have an 'A' rating from Standard and Poor's. S&P looks at growth rates and the stability of earnings and dividends in giving their grades.

Genuine Parts happens also to have one of the best records of dividend payouts in the entire market, having made consistent quarterly distributions for a full 53 years. During that time, it never lowered the quarterly payout, either.

53 Years of Uninterrupted Payouts
GPC carries very little debt (debt/equity in the quarter ending September 30, 2009 was 0.20) and also has an impressive price/sales ratio of just 0.60.

Paychex Inc. (NYSE:PAYX) has a dividend yield of 4.30% and merits S&P's highest rating of A+ for growth and stability. Moreover, the company has absolutely no debt and management's return on equity (ROE) is 38.9%. (Learn more in our ROE Tutorial.)

Paychex is a provider of payroll and other human resource services to small and medium sized businesses. The company has grown annual earnings at a rate of 13.11% over the last five years.

Kimberly Clark (NYSE:KMB) has a market cap in excess of $24 billion and gets a straight 'A' rating from S&P. The shares are currently yielding 4.09% and ROE for the company is 32.53.

New Green Initiative to Save Millions
Kimberly Clark has an 80-year history in the personal care and hygiene product market. A recent green initiative that includes "coreless" toilet paper will reduce packaging waste by nearly 55%, according to company estimates, and save the company millions. (Don't rely on Wall Street analysts for information on these stocks, check out Small Cap Research Can Have Big Impact.)

McDonald's (NYSE:MCD) notches an A- from the raters at S&P while offering investors an annual 3.85% yield. The global fast food giant also has an impressive EPS growth rate: for the last five years, it has increased earnings by an average 26.08%. Management return on equity (ROE) is a fat 30.50% over the last year and has averaged nearly 20% per annum over the last five years.

Emerson Electric Co. (NYSE:EMR) has increased its annual dividend payout for 53 straight years and currently yields 3.36%. S&P gives Emerson stock an 'A' rating.

Last year, Emerson's ROE was a strong 20.72%. This year the company's shares have appreciated by nearly 60%, since bottoming in March.

The Bottom Line
A great number of big cap companies have solid dividends and strong ratings - even after the last six month's bull run. Moreover, their fundamentals indicate that at this stage they're still far from fully priced.

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By Aryeh Katz

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