Getting the Most Bang for the Equity Buck

Through favorable capital investment, these nine S&P 500 members have generated strong returns

By David Braverman

Return on equity measures how much in earnings a company generates in four quarters compared to its shareholders' equity, as a percentage. For example, if a company made $1 million in the past year and has shareholders' equity of $10 million, then the ROE is 10%.

In effect, return on equity is a measurement of capital efficiency. It tells investors whether funds invested in the company through retained earnings and issuance of new shares are getting a favorable return.

The following nine stocks are in the S&P 500 and have a return on equity of at least 30% for each of the last three years.

Abbott Labs (ABT )

Colgate Palmolive (CL )

Dell Computer (DELL )

Equifax (EFX )

Kellogg (K )

Lexmark (LXK )

Ralston Purina (RAL )

Tupperware (TUP )

USA Education (SLM )

David Braverman is a senior investment officer with Standard & Poor's

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