Eoin Treacy's view A number of indices, such as the DAX, are now at interesting levels, because if they can successfully rally from here, they will have sustained the progressions of higher reaction lows which have been the hallmark of the advances since March 2009. However, if the Index sustains a decline below the 5350 it will have broken the sequence of higher reaction lows and fallen through the trend mean, defined by the 200-day moving average, which would probably signal the unfolding of a lengthier corrective phase.

Given the current uncertainty, I thought this might be a suitable time to look at some fundamental filters in an attempt to identify companies with high, relatively secure dividends.

On September 24th 2009 I performed a search on Bloomberg for companies with a current dividend yield of >6%, a 1-year growth in operating income of >0, a dividend Payout Ratio of greater than 1 and a market cap of $1billion. Today's updated table continues to be dominated by Master Limited Partnerships and Income Trusts but there are also a number of other cash flow positive businesses such as utilities, fixed-line telecom and tobacco companies.

In September, the table comprised 50 companies with a market cap of >$1billion and an additional 22 when the parameter was widened to $500million. Today, the table is comprised of 42 larger companies and an additional 29 with a market cap between $500million and $1billion, many of which were also in the September list.

I last conducted this search on Bloomberg for companies with an Enterprise value < 0, a market cap > $1000 million and a P/E > 0 on February 24th 2009. Here is table with the P/E filter removed. A negative Enterprise Value indicates that the company has more cash than the value of its equity and outstanding debt combined.

This filter for companies, performed on Bloomberg, with a market cap of over $1billion, dividend yield >5% and a cash dividend cover >2 last appeared in Comment of the Day on April 10th 2006.

In the UK, Vodafone and Royal & Sun Alliance Insurance caught my attention because both yield in the region of 6% have a high coverage ratio and share a relatively similar chart pattern.

Royal & Sun Alliance Insurance bottomed in 2003, ranged mostly below 100p until late 2005, broke upwards and has been ranging, mostly above 100p, since. It has been trading in a range between 115p and 160p for more than two years and is currently rallying from the lower side. A sustained move below 115p would be required to question scope for further higher to lateral ranging.

Vodafone bottomed in 2002 and has ranged, mostly between 100p and 150p since. It failed to sustain the upward break in mid-2007 and has fallen back to extend the already lengthy base. The share found support near 100p in 2008 and quickly rallied to 140p where it continues to encounter resistance. It is currently in the region of the lower side of the 6-month range and a sustained move below 130p would be required to question scope for further higher to lateral ranging.

Fundamental analysis is not our speciality and if subscribers can suggest more suitable fundamental filters we would be happy to attempt to replicate them in Comment of the Day. As with any investment, it is essential to do one's own due diligence before investing.