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No. of Recommendations: 2
* Dividends that are well covered. A payout ratio of less than 2/3 of earnings with those earnings well covered by cash flows is ideal, though exceptions can be made if specific circumstances warrant.

The one stock that seems to be the exception to the rule; that is, they can't cover their dividend from free cash-flow, is Air Products & Chemicals. This hasn't always been the case, though it has three of the last four years. Perhaps not surprisingly, their long-term debt has been on the rise.

APD has been on my watch list over the years, but it is this shortfall that has kept me from pulling the trigger. Perhaps they are going through an intensive capital spending period, which will prove to be the exception to the rule? However, I 'm not inclined to bank on it.

Div. paid Free cash-flow Long-term debt

TTM 540 139

2012 573 244 4,584

2011 457 402 3,928

2010 399 492 3,660

2009 373 144 3,716

(Data from Morningstar)

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