For investors looking for a dependable flow of passive income, a methodical screening process is needed to distinguish truly lasting dividend payers from risky high-yield situations. One useful technique is to concentrate on stocks that not only rate well on dividend-focused measures but also show good fundamental business soundness and earnings. This method favors companies with the monetary capacity to continue and possibly raise their distributions over time, instead of only pursuing the greatest present yield. By selecting for a high ChartMill Dividend Rating together with satisfactory scores for earnings and monetary soundness, investors can create a list of companies where the dividend is backed by a solid operational base.
Amdocs Ltd. (NASDAQ:DOX) appears as a candidate from this kind of screening tactic. The company, a supplier of software and services to communications and media providers, displays a profile that matches the central principles of careful dividend investing.
Dividend Profile: A Dependable and Increasing Distribution
The main attraction for income-oriented investors is found in DOX's dividend traits, which are outlined in its detailed fundamental analysis report. The report gives the stock a Dividend Rating of 7 out of 10, indicating a good overall evaluation.
- Appealing and Above-Average Yield: DOX provides a yearly dividend yield of 2.62%. This is higher than the average yield of its IT Services industry counterparts (0.44%) and also surpasses the present S&P 500 average.
- Good History of Increase: The company has built a dependable record, having paid and, importantly, raised its dividend for at least ten straight years. The average yearly dividend increase over this time is a notable 11.39%.
- Lasting Quality Factors: The payout ratio, which indicates the share of profits paid as dividends, is at 40.62%. This is a workable level that implies the dividend is well-supported by current earnings, leaving sufficient space for reinvestment and a cushion against profit changes. A point for awareness from the analysis mentions that profit increase has recently been slower than dividend increase, a trend investors should note for lasting quality.
Supporting Fundamentals: Earnings and Monetary Soundness
A high-yielding dividend is only as reliable as the company's capability to maintain it. This is where the screening requirements for satisfactory earnings and soundness show their worth, and DOX performs acceptably on both counts.
Earnings Quality: DOX receives a Profitability Rating of 7. The company produces good returns on its assets and invested capital, doing better than a large portion of its industry rivals. Its operating margin is especially good, placed in the higher range of the sector and displaying positive recent improvement. This steady earnings power is the source that finances the dividend.
Satisfactory Monetary Soundness: With a Health Rating of 6, the company's balance sheet displays both positive aspects and points to observe. A significant positive is its very small debt amount, with a Debt-to-Equity ratio of 0.18, showing a careful capital framework and little monetary danger. Its solvency measures, like the Altman-Z score, are sound. The primary area marked for notice is liquidity; the current and quick ratios are lower than many industry counterparts, indicating a closer working capital situation that deserves watching.
Valuation Setting
For dividend investors intending to hold for the long term, the purchase price is important. DOX seems fairly valued, trading at a Price-to-Earnings ratio of 12.03 and a Forward P/E of 11.11. These figures are much lower than the wider S&P 500 averages and are less expensive than most companies in its own industry, possibly providing a degree of safety for new investors.
Conclusion
Amdocs Ltd. illustrates a case in using a measured dividend screening approach. It provides a yield that is appealing both on its own and compared to its market, supported by a ten-year practice of lifting its distribution. This dividend narrative is backed by the important supports of good earnings and a generally sound, low-debt balance sheet. While investors should note the mentioned liquidity measures and confirm future profit increase can maintain the dividend path, DOX fits the aim of finding income-producing stocks constructed on a base of operational quality.
This review of DOX came from a systematic screen for good dividend payers. You can examine the complete list of present results from this "Best Dividend Stocks" screen by clicking here.
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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation to buy or sell any security, or an endorsement of any investment strategy. All investment involves risk, including the potential loss of principal. Investors should conduct their own research and consider their individual financial circumstances and risk tolerance before making any investment decision.
