10 U.K. High-Quality Dividend Stocks With Free Cashflow Yields Over 4%

High quality investments existing all over the world but the most of them can be found on the mother country of capitalism, United States.

Asset prices have grown into unbelievable dimensions due to the expansive monetary policy. In addition, the dollar was also on the strong pace.

It does make sense to look for high-quality investments abroad if you believe that the current assets in the USA are overpriced in average.

Today, I like to give an overview about some high-yielders in terms of free cash flow from the UK. In addition, those stocks pay solid dividends with room to grow them for years.

These are the results....

Why You Should Look At These 16 Stocks With Cheap Free Cash Flows

When you put money into the market, you should be aware of the market valuation. One of the major problems in valuation is definitely to predict future cash-flows.

Nobody of us has a crystal-ball and no one can predict the future.

The second problem is that there are companies that must invest massively into the business model in order to boost growth or to replace old machines or buildings.

Investors often calculate with free cash flows. Those are the real income of the company, available for dividends, buybacks or mergers and acquisitions.

Today I like to introduce the cheapest Dividend Achievers with a low price to free cash flow of less than 15.

16 companies fulfilled my criteria of which four have a dividend yield over 3 percent. The most of the results come from the property and casualty insurance industry.

Insurer generates massive cash but they have also big problems with decreasing premiums and increasing competition. There are always good reasons why some companies are cheap.

You may also like my article about the best dividend stocks from the title insurance industry. I still prefer, like Warren Buffett, the fastest growing companies from the insurance sector. Those are ACE, UNH and TRV.

What do you think about the screen?

These 7 Dividend Cash Cows Produce Money Like Milk (Part I)

Investing is great. You can spend money on stocks and if your bet goes wild you will make a lot of money. That's a great dream for all of us and I can tell you that it's possible to become an investment Pro.

I'm a guy who looks steadily at stocks and try to find attractive investment stories and cheap stocks in order to make a good return.

I'm not short term focused; plan to hold most of my stocks over years and decades. Due to my long investment horizon, I need good companies that grow over time their business, pay me good dividends, and grow dividends as well.

But the most important question is that the corporate can grow without taking new investors on board. Those actions will grow outstanding shares in general and bring pressure on earnings per share growth.

I look for companies have generated high free cash flows, companies with a business model that don't need much money to keep their operational business alive.

I've tried to find some new ideas with an old screener who has a quick option; it’s called the reinvestment rate. I don't know how they calculate this ratio but when I sort the list of large with high margins by this ratio, companies with low investment spending on their operational cash flow come first.

Big Money Roll In Your Pocket

I talk about companies with a high scalable business, stocks with the lowest need of capital expenditures. First you might think about Facebook or all the great tobacco companies. For sure those shares generate big free cash flows.

But there are much more companies, I talk about technology stocks and money platforms. The key is here the platform business. Each new customer doesn't cause new costs and bring free cash into the corporate. That's a great idea of making money.

The only item to care about is market entry barriers. Can competitors easily enter and push down margins? If yes, keep your fingers away of buy only at low multiples.

Below are seven detailed stocks. I will follow up with 8 additional stocks. That's only a selection; there are much more companies available. Some of them pay no dividends other a low one but dividend is not the key.

Look at Part II here: These 8 Dividend Stocks Bubbling Cash Like Lava Gold Mines (Part II)

Most of the presented results come from the tech and financial space.

7 Dividend Stocks with strong free cashflows are...

5 Cash-Hoarding Stocks With Top Yields And Strong Cash Flows (PFE, COP, CVX, LLY, MRK)

While I made my daily research on several stock market screeners, one question came deeply into my mind. When the markets are so expensive, who are the cheapest stocks, not by P/E but in terms of cash flow or Ebitda. I also included the Cash and debt of the company.

So, the good thing is that you can buy stocks in every market cycle but you must be careful with your investment spending.

Your final return depends in the end on your inital investment cost and if you buy at a high price, your return will fall into a low or negative area.

Good to know that dividends can upper your yield but my experience is that it could be very painful for an investor to look at a suffering return over years.

These are my criteria:

- Market Cap over 15 Billion

- Dividend Yield in the higher yield space over 3 percent

- Cheapest Enterprise-To-Ebitda Ratio on the market

My screen delivered some interesting results in the large cap area: Oil companies are top. 

COP, CVX are the best results in terms of EV/EBITDA. Both have a ratio of around 5 which is very comfortable in the current situation but what about Russia and the Middle East crises?

My second best results came from the technology space: Intel and Verizon. Warren Buffett added his VZ stake by one third on the past quarter and he might be right because VZ is much cheaper than rival AT&T. The EV/EBITDA ratio is only at 6.35 while T has a ratio of 9.66.

Healthcare is also good positioned with Merck, Pfizer and Eli Lilly but those are suffering on the patent cliff.

I believe that it does not make sense to look at stocks with a higher ratio. For sure cash flows can come down and the full sheet becomes trash but most of the companies serve values. What are your thoughts about my current screen? How are you invested?

These are the best results in terms of lowest debt-to-equity ratio:

Warren Buffett's Targets Part I: Potential White Elephants Of The Guru Investor

Warren Buffett is one of the most trusted and popular investors on the market. He made from a dozen dollars over USD 58 billion. On this blog, I also cover the activities of the guru investor and publish his trades and thoughts.

There are several speculations on the market what Warren Buffett buys next. He has around USD 15 billion in cash, a number that is growing monthly. Some of Warren Buffett's criteria are:

- Market Capitalization from $15 Billion to $40 Billion

- Capital Expenditures / Net Fixed Assets > 10%

- 5-Year Average Growth in ROIC in Highest 50%

- P/E Ratio < Average Company Value in Home Market

- Return on Common Equity > 10%

- Excludes Banks, Brokerages, Asset Managers, Technology, Biotechnology Companies

By screening the market with the above mentioned criteria, there are popping out a few interesting stocks. Some are often discussed like General Mills or Hershey, W.W. Grainger or FedEx.

Big takeovers make sense for Warren Buffett, also when they are higher valuated. More important are the stable cash flows. The strategy is to buy stocks that have big brands and produce products. They buy commodities and create wonderful things for people all over the world.

5 picks that Warren Buffett would like to consider....

General Mills (NYSE:GIS) has a market capitalization of $30.78 billion. The company employs 41,000 people, generates revenue of $17.774 billion and has a net income of $1.793 billion. General Mills’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.443 billion. The EBITDA margin is 19.37 percent (the operating margin is 16.04 percent and the net profit margin 10.09 percent).

Financial Analysis: The total debt represents 35.17 percent of General Mills’s assets and the total debt in relation to the equity amounts to 119.44 percent. Due to the financial situation, a return on equity of 28.34 percent was realized by General Mills. Twelve trailing months earnings per share reached a value of $2.69. Last fiscal year, General Mills paid $0.99 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.31, the P/S ratio is 1.73 and the P/B ratio is finally 4.73. The dividend yield amounts to 3.08 percent and the beta ratio has a value of 0.20.

Long-Term Stock Price Chart Of General Mills (GIS)

Long-Term Dividend Payment History of General Mills (GIS)

Long-Term Dividend Yield History of General Mills (GIS)

Hershey (NYSE:HSY) has a market capitalization of $21.45 billion. The company employs 12,100 people, generates revenue of $6.644 billion and has a net income of $660.93 million. Hershey’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.399 billion. The EBITDA margin is 21.07 percent (the operating margin is 16.72 percent and the net profit margin 9.95 percent).

Financial Analysis: The total debt represents 40.10 percent of Hershey’s assets and the total debt in relation to the equity amounts to 183.93 percent. Due to the financial situation, a return on equity of 69.79 percent was realized by Hershey. Twelve trailing months earnings per share reached a value of $3.45. Last fiscal year, Hershey paid $1.56 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 27.80, the P/S ratio is 3.21 and the P/B ratio is finally 20.71. The dividend yield amounts to 2.02 percent and the beta ratio has a value of 0.21.

Long-Term Stock Price Chart Of Hershey (HSY)

Long-Term Dividend Payment History of Hershey (HSY)

Long-Term Dividend Yield History of Hershey (HSY)

W.W. Grainger (NYSE:GWW) has a market capitalization of $17.65 billion. The company employs 21,100 people, generates revenue of $8.950 billion and has a net income of $698.85 million. W.W. Grainger’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.357 billion. The EBITDA margin is 15.16 percent (the operating margin is 12.64 percent and the net profit margin 7.81 percent).

Financial Analysis: The total debt represents 11.26 percent of W.W. Grainger’s assets and the total debt in relation to the equity amounts to 18.67 percent. Due to the financial situation, a return on equity of 23.97 percent was realized by W.W. Grainger. Twelve trailing months earnings per share reached a value of $11.25. Last fiscal year, W.W. Grainger paid $3.06 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 22.61, the P/S ratio is 1.97 and the P/B ratio is finally 5.84. The dividend yield amounts to 1.46 percent and the beta ratio has a value of 0.92.

Long-Term Stock Price Chart Of W.W. Grainger (GWW)

Long-Term Dividend Payment History of W.W. Grainger (GWW)

Long-Term Dividend Yield History of W.W. Grainger (GWW)

CBS Corporation (NYSE:CBS) has a market capitalization of $37.00 billion. The company employs 20,930 people, generates revenue of $14.089 billion and has a net income of $1.669 billion. CBS Corporation’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.594 billion. The EBITDA margin is 25.51 percent (the operating margin is 20.95 percent and the net profit margin 11.85 percent).

Financial Analysis: The total debt represents 22.38 percent of CBS Corporation’s assets and the total debt in relation to the equity amounts to 57.98 percent. Due to the financial situation, a return on equity of 16.24 percent was realized by CBS Corporation. Twelve trailing months earnings per share reached a value of $2.94. Last fiscal year, CBS Corporation paid $0.44 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 20.96, the P/S ratio is 2.63 and the P/B ratio is finally 3.80. The dividend yield amounts to 0.78 percent and the beta ratio has a value of 2.27.

Long-Term Stock Price Chart Of CBS Corporation (CBS)

Long-Term Dividend Payment History of CBS Corporation (CBS)

Long-Term Dividend Yield History of CBS Corporation (CBS)

FedEx (NYSE:FDX) has a market capitalization of $44.34 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 $5.19. 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 27.37, the P/S ratio is 1.00 and the P/B ratio is finally 2.60. The dividend yield amounts to 0.42 percent and the beta ratio has a value of 1.50.

Long-Term Stock Price Chart Of FedEx (FDX)

Long-Term Dividend Payment History of FedEx (FDX)

Long-Term Dividend Yield History of FedEx (FDX)

If you would like to receive more thoughts about Warren Buffett, you should subscribe to my free e-mail list. Alternatively, you can follow me on Facebook or Twitter.

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*I am long GIS. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

Yields Dividend Champions | Yields Dividend Contenders | Yields Dividend Kings | High-Yield Large Cap | +10% Yielding Stocks | Dividend Aristocrats |

Cisco Systems (CSCO): Position Increase By 44 Percent

I’ve increased my current stake in Cisco Systems last Friday by 44 percent: I purchased 40 additional shares at $21.28 or $856 total investment cost.

Cisco yields at 3.2 percent but has only a dividend payout ratio of 33.5 percent. The company generates over $10 billion free cash flow per year and announced recently to boost its current share buybackprogramm by $15 billion.

My stake is down 15.31 percent on average and marked the highest unrealized single trading loss within the 54 position strong portfolio. 

Due to the 44 percent position increase, the current trading loss shrinks to 11.27 percent but the position size and therefore the trading risk also rises by a small amount. The overall picture looks still good with a 2.5 percent Cisco portfolio exposure. It’s also the second biggest position behind IBM.

Cisco shares should now contribute around 66 bucks per year to the total dividend income of the portfolio. The full-year estimated dividend income rises to $2,826.

Latest Portfolio Transactions (Click to enlarge)

Latest Portfolio I (Click to enlarge)

Latest Portfolio II (Click to enlarge)

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For readers who are new to the matter and my dividend growth philosophy: I funded a virtual portfolio with 100k on October 04, 2012 with the aim to build a passive income stream that doubles each five to ten years. I plan to purchase each week one stock holding until the money is fully invested. The total number of constituents is expected at 50 – 70 companies and the dividend income should be at least at $3,000 per year.

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Stock holdings of the Passive Income Portfolio are up 10.21 percent on average. Due to the high cash values over the recent year, the full portfolio performance amounts to 10.09. 

The full portfolio performance is not as good as the values from major indices like the Dow Jones or S&P 500. Those performed twice as good as my portfolio. But my strategy is long-term and income orientated. I like to create an income vehicle that doubles its income each 10 years from alone.

Latest Portfolio Performance (Click to enlarge)

Here is the income perspective of the portfolio

Sym	Name	P/E Ratio	Dividend Yield	Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	33.18	3.54	28.90	50	$65.00	$1,845.50
LMT	Lockheed Martin C	14.58	3.5	92.72	20	$95.60	$2,763.80
INTC	Intel Corporation	13.12	3.71	21.27	50	$45.00	$1,241.00
MCD	McDonald's Corpor	17.23	3.27	87.33	25	$78.00	$2,420.00
WU	Western Union Com	10.89	3.04	11.95	100	$50.00	$1,677.00
PM	Philip Morris Int	16.23	4.13	89.76	30	$105.87	$2,574.90
JNJ	Johnson & Johnson	20.73	2.79	69.19	20	$51.80	$1,888.80
MO	Altria Group Inc	14.42	4.87	33.48	40	$72.00	$1,498.40
SYY	Sysco Corporation	20.22	3.34	31.65	40	$44.80	$1,372.40
DRI	Darden Restaurant	18.49	4.03	46.66	30	$63.00	$1,574.40
CA	CA Inc.	13.87	3.08	21.86	50	$50.00	$1,642.50
PG	Procter & Gamble	21.01	2.86	68.72	25	$59.20	$2,113.00
KRFT	Kraft Foods Group	17.01	3.85	44.41	40	$80.00	$2,142.00
MAT	Mattel Inc.	19.16	3.14	36.45	40	$57.60	$1,850.40
PEP	Pepsico Inc. Com	19.23	2.04	70.88	20	$33.46	$1,663.00
KMB	Kimberly-Clark Co	21.61	2.34	86.82	15	$36.45	$1,583.70
COP	ConocoPhillips Co	10.84	3.81	61.06	20	$52.80	$1,415.40
GIS	General Mills In	18.83	2.83	42.13	30	$42.60	$1,545.00
UL	Unilever PLC Comm	18.78	3.5	39.65	35	$48.83	$1,423.10
NSRGY	NESTLE SA REG SHR	19.91	3.02	68.69	30	$65.31	$2,197.20
GE	General Electric	19.89	2.87	23.39	65	$49.40	$1,751.10
ADP	Automatic Data Pr	26.71	2.22	61.65	25	$43.50	$1,991.50
K	Kellogg Company C	23.17	2.97	61.52	25	$45.00	$1,541.00
KO	Coca-Cola Company	20.65	2.81	38.83	40	$44.80	$1,618.40
RTN	Raytheon Company	14.81	2.5	57.04	20	$43.00	$1,733.60
RCI	Rogers Communicat	11.97	3.8	46.5	50	$84.00	$2,245.00
GPC	Genuine Parts Com	18.01	2.01	77.06	20	$32.22	$1,634.40
TSCDY	TESCO PLC SPONS A	N/A	4.19	17.08	110	$75.79	$1,808.40
APD	Air Products and	22.74	2.6	85.71	15	$41.55	$1,642.65
GSK	GlaxoSmithKline P	20.59	4.61	52.16	30	$72.24	$1,579.50
WMT	Wal-Mart Stores	15.27	1.77	79.25	20	$28.20	$1,598.80
BTI	British American	15.96	4	111.13	23	$96.14	$2,413.39
CHL	China Mobile Limi	10.73	4.09	55.32	40	$89.52	$2,200.80
MMM	3M Company Common	19.49	2	110.27	15	$38.10	$1,929.15
TUP	Tupperware Brands	19.12	2.43	80.98	15	$33.30	$1,399.05
IBM	International Bus	12.19	2.1	193.17	20	$74.00	$3,553.40
HAS	Hasbro Inc.	24.01	2.98	44.09	30	$46.80	$1,552.80
T	AT&T Inc.	25.07	5.26	34.47	30	$54.00	$1,035.90
WAG	Walgreen Co. Comm	21.92	2.1	44.25	30	$35.40	$1,701.30
AFL	AFLAC Incorporate	10.03	2.16	59.39	20	$28.40	$1,332.80
TGT	Target Corporatio	16.76	2.52	68.69	32	$50.56	$2,028.16
CSCO	Cisco Systems In	11.37	2.44	23.98	130	$66.30	$2,766.40
DE	Deere & Company C	9.34	2.35	84.11	15	$29.85	$1,279.80
RGR	Sturm Ruger & Co	13.77	2.92	51.65	20	$42.48	$1,435.40
LO	Lorillard Inc Co	15.88	4.35	42.3	30	$66.00	$1,524.00
UNP	Union Pacific Cor	17.9	1.82	154.75	8	$23.68	$1,314.72
IDA	IDACORP Inc. Com	15.59	3.02	47.94	20	$31.40	$1,058.00
BAX	Baxter Internatio	16.89	2.14	66.38	20	$28.60	$1,347.80
MSFT	Microsoft Corpora	14.23	2.55	33.88	40	$38.80	$1,534.40
ACN	Accenture plc. Cl	15.36	2.3	77.71	20	$34.80	$1,510.60
BCE	BCE Inc. Common	14.31	3.95	44.26	25	$42.98	$1,092.50
VZ	Verizon Communica	63.68	4.24	50.31	30	$62.25	$1,484.40
CVX	Chevron Corporati	9.9	3.22	124.03	10	$39.00	$1,222.90
ORCL	Oracle Corporatio	14.98	1.21	35.2	40	$16.80	$1,419.20
						$2,826.17	$93,712.72
						Average Yield	3.02%
						Yield On Cost	3.33%