MILLBURN, N.J. ( Stockpickr) -- I like companies with strong cash flow. I like companies that pay above-market dividends. I like companies with strong balance sheets. I like companies that generate cash.
Recognizing this, I decided to try to create a portfolio of stocks that combines these factors.
I used two criteria in my analysis:1. Dividend Payout Ratio: This represents the amount of earnings that are paid out in the form of dividends to shareholders. We care about this because it shows that the company is focused on returning capital to shareholders. This is important if you subscribe to the dividend discount model of stock valuation. 2. Debt to Market Capitalization: This is a measure of leverage as well as a measure of the strength of the balance sheet. I prefer that a company uses its operational cash flow rather than debt to pay dividends to shareholders. Hence, I sought out companies with low debt-to-market-capitalization ratios. Here are six stocks that received high marks in these categories.