For investors looking for steady income, a methodical selection process is important. One useful approach is to search for companies that provide a good dividend now and also have the basic financial soundness to maintain and possibly raise those payments in the future. This requires examining more than just the current yield to evaluate earnings, which support the dividend, and balance sheet soundness, which helps the company manage economic challenges without reducing its payout. A stock that performs favorably in these three areas, dividend quality, profitability, and health, can be a key part of a durable income portfolio.
Booz Allen Hamilton Holding Corp. (NYSE:BAH) appears as a candidate for more detailed review using this method. As a top firm in management and technology consulting, mainly for U.S. federal government agencies, the company works in an area recognized for comparative predictability and multi-year contracts. This approach to business can create a consistent income source, a positive feature for dividend reliability.
Dividend Profile: A Steady and Increasing Payout
The main attraction for income investors is Booz Allen Hamilton's dividend history and its present features, which are outlined in its fundamental analysis report.
- Yield and Growth: The company provides a forward dividend yield near 2.58%, higher than both the sector average (1.58%) and the wider S&P 500 (about 2.00%). Notably, it has shown a firm dedication to giving capital back to shareholders, with a dividend that has risen at a yearly rate close to 15% over the last five years.
- History of Consistency: Dependability is important for dividend investors. Booz Allen Hamilton has both paid and raised its dividend each year for at least ten years. This steady history of increases is a major favorable sign, showing management's belief in the company's continuing ability to generate cash.
- Payout Durability: A crucial measure is the payout ratio, which shows the share of earnings distributed as dividends. Booz Allen's ratio is a manageable 33%. This shows the company uses a minority of its net profit to pay the dividend, keeping a good amount to put back into operations, handle obligations, and continue the payout even if profits dip somewhat. This careful method helps the dividend's future durability.
Supporting Fundamentals: Profitability and Financial Soundness
A high dividend yield is only reliable if the company is sound. The selection method highlights satisfactory profitability and financial health for a clear cause: a profitable company produces the cash required for dividends, and a solid balance sheet safeguards that ability in difficult periods.
- Solid Profitability: Booz Allen Hamilton performs well here, receiving a high ChartMill Profitability Rating of 8. The company's return figures are particularly strong, with a Return on Equity (ROE) above 82% and a Return on Invested Capital (ROIC) near 16%, both placing in the best group of its Professional Services sector. High and effective profitability directly backs the ability to pay and raise shareholder returns.
- Satisfactory Financial Health: The company gets an average Health Rating of 5, pointing to a mix of positives and smaller points to watch. Favorably, liquidity is firm, with current and quick ratios higher than the sector middle, showing no immediate problem in covering responsibilities. The Altman-Z score, an important measure of financial risk, is also at a good level. The main area for attention involves borrowing; the debt-to-equity ratio is higher than sector counterparts. This is partly balanced by the firm and reliable free cash flow production, which gives the ability to handle this debt without strain.
Valuation Setting
For dividend investors intending to own shares long-term, the purchase price still has importance. Booz Allen Hamilton seems fairly valued. Its Price-to-Earnings (P/E) ratio near 14 and Forward P/E just above 14 are lower than both the general market and its sector average. Paired with its solid profitability, this price can be viewed as interesting, offering an appealing combination of income and reasonable price.
A Candidate for More Review
Booz Allen Hamilton makes a strong argument for investors focused on dividends. It joins an above-average and dependably increasing yield with the fundamental support of solid profitability and satisfactory financial health. The company's established position in government consulting gives a level of income predictability, while its careful payout ratio provides a safety margin. Although the higher debt level is an item for continued observation, it is currently backed by very good cash generation.
This review of Booz Allen Hamilton came from an organized search for good dividend payers. Investors interested in finding other firms that fit similar standards of high dividend quality, satisfactory profitability, and financial health can review the complete list of outcomes by using the Best Dividend Stocks screen.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. The analysis is based on data provided and fundamental ratings, which are subject to change. Investors should conduct their own thorough research and consider their individual financial situation and risk tolerance before making any investment decisions.
