For investors looking for a dependable source of passive income, a methodical screening process is needed to distinguish truly lasting dividend payers from risky high-yield situations. A frequent method involves selecting for companies that provide a good dividend and also have the basic financial soundness to keep and possibly increase those payments. This usually means searching for stocks with high scores for dividend quality, aided by good profitability and a sound balance sheet. One stock that appears from this kind of methodical screening is Bristol-Myers Squibb Co (NYSE:BMY).
Dividend Attraction: A High and Increasing Payout
Leading BMY's attraction for income investors is its large dividend yield, now at 4.51%. This is over twice the average yield of the S&P 500 and puts the company in the high rank of its pharmaceutical industry group for income. Yet, a high yield by itself can be a caution if it comes from a falling stock price. BMY’s position is made stronger by its past and growth path.
- Dependable History: The company has paid dividends for at least ten years, giving a record of dedication to returning capital to shareholders.
- Notable Growth: Also, BMY has increased its dividend at an average yearly rate of 11.67% over the last five years. This steady increase is a main signal of management's belief in the company's future cash flows and a vital part for dividend investors wanting to guard their income from inflation.
Assessing Dividend Longevity
A high yield and solid growth are attractive, but their longevity is most important. This is where the basic well-being and profitability of the company become vital, as they supply the source that pays for the dividend. BMY’s financial outline gives a varied but finally supportive view.
- Profitability Soundness: BMY gets a good ChartMill Profitability Rating of 7. The company shows strong margins, with an Operating Margin of 33.51% that beats 95% of its industry group. Good returns on assets and invested capital further point to an effective and profitable business. This high degree of profitability is the primary guard for the dividend, creating sufficient earnings from which to make payments.
- The Payout Ratio Factor: A note of care is the company's payout ratio, which shows 82.81% of earnings are now used for dividends. This is elevated and indicates less space for difficulty. However, the basic analysis states that while the dividend is increasing, earnings are forecast to increase at a still quicker rate in the near future. This situation is important, as it means the high payout ratio should get better, making the dividend more lasting over time.
- Financial Soundness Gives Support: BMY receives a ChartMill Health Rating of 5, pointing to an acceptable but not outstanding financial state. The company produces value, as its return on invested capital is above its cost of capital. Its debt-to-free-cash-flow ratio is also good, meaning it could reduce debt from cash flows in a sensible period. While the debt-to-equity ratio is high, the general health view suggests the company is not in immediate financial trouble, which helps protect the dividend from sudden balance sheet strains.
Price and Growth Setting
For dividend investors intending to hold for the long period, entry price is important. BMY seems attractively valued, trading at a Price/Earnings ratio of 8.42 and a forward P/E of 9.12. This is a notable discount to both the wider market and the pharmaceutical industry average. This price gives a buffer and improves the forward dividend yield for new investors.
The growth view is split. While revenue projections are low, earnings per share are predicted to rise at a good double-digit yearly rate over the next few years. This expected earnings increase is the important element that backs the argument for both dividend longevity and possible share price gain next to the income.
A Choice for a Steady Dividend Portfolio
Bristol-Myers Squibb offers a strong case for dividend-centered investors. It joins a high, well-supported yield with a good history of increase, all supported by a profitable company. The high payout ratio is a point to watch, but it is lessened by good expected earnings increase and an acceptable general financial health picture. Trading at a low price, BMY gives a mix of income, increase possibility, and price that fits a careful dividend investment plan.
For a complete look at the numbers behind these ratings, you can see the full ChartMill Fundamental Analysis Report for BMY.
Find Other Dividend Options BMY was found using a structured screen for high-grade dividend payers. If you are searching for other companies that fit similar standards of good dividend ratings, profitability, and financial soundness, you can see the full screen results here: Best Dividend Stocks Screen.
Disclaimer: This article is for information only and does not make financial advice, a suggestion, or an offer or request to buy or sell any securities. The information given is based on supplied data and should not be the only ground for any investment choice. Investors should do their own research and talk with a qualified financial advisor before making any investment choices.
