Course 407: High-Yield Stocks
Is the Balance Sheet Healthy?
In this course
1 Introduction
2 What Is the Company's Dividend Track Record?
3 Is the Payout Ratio Rising?
4 Are the Company's Sales and Earnings in Line and Stable?
5 Does the Company Generate Consistent Free Cash Flow?
6 Is the Balance Sheet Healthy?
7 How Has the Stock Performed?
8 Is This Stock Expensive Relative to Others in Its Industry?
9 Conclusion: Looking Both Ways

Unlike growth-type companies, high-yield companies don't have to be able to fund a lot of expansion. Still, they need to have finances that are at least healthy enough to support their businesses. Too much debt, for example, can soak up cash flow and reduce a company's options for further financing. Philip Morris' long-term debt appears to be manageable. Its debt-to-equity ratio of 0.7 at the end of 1999, while higher than the high-yield average, was still lower than that of rival tobacco giant RJ Reynolds RJR. The huge amounts of cash Philip Morris generates make a little extra debt much more palatable. It's also sitting on $5 billion in cash, or about 8% of its total assets.

Next: How Has the Stock Performed? >>


Search
Print Lesson |Feedback
Del.icio.us Del.icio.us | Digg! digg it
Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores.
Copyright 2015 Morningstar, Inc. All rights reserved. Please read our Privacy Policy.
If you have questions or comments please contact Morningstar.