Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

April 27, 2011 - National Presto Industries, Inc. (NPK-NYSE) engages in the manufacture and sale of housewares/small appliances, defense products, and absorbent products. The company operates in three segments: Housewares/Small Appliance, Defense Products, and Absorbent Products.

The Defense Products segment manufactures precision mechanical and electro-mechanical products for the U.S. Department of Defense (DOD) and DOD prime contractors. Products include training ammunition, fuzes, firing devices, initiators, and medium caliber cartridge cases. This segment also performs load, assemble, and pack operations on ordnance related products.

The Absorbent Products segment manufactures and sells private label adult incontinent products and diapers. It sells to distributors and other absorbent product manufacturers. National Presto Industries, Inc. was founded in 1905 and is based in Eau Claire, Wisconsin.

Quite a mix. Appliances, bullets and diapers. But it works for National Presto and its shareholders. The company made it through the recession with increased earnings every year, and in 2009, earnings jumped to $9.13 a share, almost 50% ahead of 2008's final tally of $6.45. Last year, earnings finished at $9.26. This year, 1 analyst has an estimate of $10.16 a share, another 9.11% improvement.

That's because while earnings continue to improve, the company returns most of its earnings to shareholders, giving up capital that could be used for expansion or acquisitions to grow the business above and beyond normal growth.

While the economy hasn't hurt NPK's bottom line severely, there's no reason to think earnings are going to move up significantly. Small appliances are showing better results as consumers open their wallets a little wider. The DOD keeps buying bullets. And the Absorbent Products group has several new offerings that should boost sales.

But margins may be narrower as transportation costs go higher due to fuel prices rising. Also raw materials are more expensive. Even with a large backlog that allows for confidence in buying large quantities of needed materials, some inflation in prices is bound to affect margins. Another factor for squeezed profitability: lower interest rates on the company's $150 million in cash.

Investors already knew most of this. They beat the stock down by 20% after the fourth quarter earnings came out, afraid that margins would narrow. They also didn't like the revenue totals falling short of estimates. So, despite the long wait for that dividend, some investors may find this set back in price an opportunity.

Essential numbers: Officers and directors own 30.1% of the stock. There are only 6.86 million shares Outstanding with a Float of 4.90 million. This is a thinly traded stock which can be great when everyone wants to buy the stock but deadly when everyone wants to sell. Revenues for the last 12 months were $479 million. Market Cap is $752 million. Trailing P/E is 11.84. Price to sales ratio is 1.57. Price to Book is 2.19. Operating margin for the last 12 months was 20.27% and Profit margin was 13.26%.
Return on Equity was 18.69% and Return on Assets was a notable 14.84%. Beta is .87. Total cash is $150.72 million for $21.96 a share. There is no debt. Current ratio is 5.18. Book value is $50.10.

Those looking for yield should like this story. While there is no short term catalyst to rocket NPK higher, the large dividend will most likely keep the stock price from slipping too far below where it is now. Of course, you have to wait almost a year for that distribution, but as they say, all good things come to those who wait.