It’s good to owe nothing.
Companies that take on a lot of debt sometimes have trouble making it through difficult economic times. Sometimes they go broke. Hertz comes to mind. So do Sears, J.C. Penney, Nieman Marcus, Pier 1, J. Crew and so on. They disappear from stock screens completely.
Sometimes they manage to hang in there somehow, year after year: General Electric GE with long-term debt at 2 times equity or Oracle ORCL now sitting with a 3.5 debt to equity ratio. Or United Parcel Service UPS with long-term debt at 7 times shareholder equity.
Companies that owe nothing do exist and during these uncertain days they might be attracting the interest of large institutional value investors who examine debt metrics closely. If a 2nd wave of Covid-19 hits in, say, October or November, would you prefer to own stocks with lots of debt or those with little or none?
If little or none is the answer, here’s a list of 5 that seem to qualify.
AllianceBernstein AB Holding AB is a New York Stock Exchange-traded investment management firm based in New York City.
The company has no long-term debt and, at this price, pays a 9.28% dividend. Earnings are off this year although the 5-year record remains positive. The price/earnings ratio of the stock is 10.5 and AllianceBernstein trades at 1.79 book. Average daily volume is relatively light at about 569,000 shares.
China Mobile is a telecommunications company based in Hong Kong and whose shares are traded on the New York Stock Exchange.
The firm’s shareholder equity greatly exceeds a bit of long-term debt. China Mobile pays a 6.36% dividend. Earnings are in the red this year and the 5-year record is slightly negative. The stock trades at an 8% discount to its book value. The price/earnings ratio is 9.5.
Future Fuel is a New York Stock Exchange listed company in the business of biofuels and fuels with headquarters in Clayton, Missouri.
There is no long-term debt on the books of the company. They pay investors a 2% dividend. Earnings per share were excellent last year and they’re in the green over the last 5 years. FutureFuel’s price/earnings ratio is 5 and it trades at 1.48 book value. The stock’s average daily volume is light at 262,000 shares.
Hollysys Automation Technologies is NASDAQ NDAQ -traded and based in Singapore. They make electrical equipment and parts.
The company holds no debt and they’re paying a dividend that comes to 1.57%. Both the 5-year record of earnings and the most recent year’s are quite good. Hollysys is available for purchase at a 17% discount from book. The price/earnings ratio is 7.8. Average daily volume falls in the “not that much” category at 258,000 shares.
LLoyd’s Banking Group is in financial services with headquarters in London and traded on the New York Stock Exchange.
The company has no debt and continues to pay a 3.59% dividend. Earnings have been in the red this year. The 5-year record is positive. Lloyd’s trades at only 57% of its book value. The price/earnings ratio is 5.2.
These are not buy recommendations. Investors would want to conduct extensive further research. These 5 make it through the screen for low or no debt and which continue to pay dividends — 2 metrics examined closely by those value investors who tend to stay out of the news.
Stats courtesy of FinViz.com.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.