Which companies have the ability to initiate a dividend?

There are 16 companies in the S&P 500 that have room to do so, according to Bank of America/Merrill Lynch, the investment banking arm of Bank of America.

Recently Bank of America/Merrill Lynch generated 20 stock screens for investors to peruse, including high-quality cash-rich stocks for investors to consider.

"Our themes include large-caps over small-caps, high quality over low quality, liquidity over leverage and sustainable/growing dividends over high dividend yield," the analysts wrote in an April 29 note to clients.

BofA/Merrill Lynch found 16 companies in the S&P 500 that could initiate a dividend, based on the following criteria:

  • Low debt vs. the industry in which it operates (based on net debt/net operating profit after taxes vs. the median for the respective industry);
  • Cash as a percentage of market cap that is at least 2%;
  • Stable earnings trends based on positive earnings-per-share growth in the prior fiscal year and expectations for the current year; and
  • No significant profit acceleration anticipated.

The criteria exclude stocks in the financial services sector. The metrics are as of March 31.

BofA/Merrill Lynch cautions that the screens are not recommended lists, either individually or as group of stocks, and that investors should consider the fundamentals of each company as well as their own individual investment objectives before making any investment decisions.

With that said, here is the list of 16 stocks with room for a dividend, according to BofA. If the stock is covered by BofA/Merrill Lynch equity analysts, we've included a snippet of their investment thesis.