For investors looking for a dependable source of passive income, a systematic screening method can be a good first step. One such process looks for companies that provide a good dividend and also have the fundamental financial soundness to maintain and possibly increase those payments. This technique emphasizes quality by selecting for stocks with strong results in dividend continuity, earnings power, and balance sheet condition, trying to steer clear of high-yield situations where a large payout might be threatened by a poor operational base. This quality-oriented screen recently identified Genpact Ltd (NYSE:G), a worldwide professional services firm, as a prospect deserving more study for portfolios centered on dividends.
Dividend Profile: A Balance of Yield and Growth
The payment is central to any dividend investment, and Genpact has an interesting outline. The company now has a dividend yield near 2.07%, which is good compared to the wider S&P 500 average and notably above the average yield in its IT Services sector. Most significantly, the dividend is supported by a solid past and an upward trend.
- Consistent History: Genpact has distributed dividends for over ten years and has not cut its payment in the last five years, showing a dedication to giving capital back to shareholders.
- Notable Increase: The dividend has risen at a yearly rate close to 11.5% over the past five years, a speed that exceeds inflation and adds considerably to overall gains over time.
- Maintainable Payment: A crucial measure for continuity, the payout ratio, is at a very manageable 21.3%. This shows the company spends under one-fourth of its profits on the dividend, leaving plenty of space for business investment and protection from possible profit changes.
This mix of a reasonable initial yield, a record of consistent and increasing payments, and a low payout ratio fits well with a plan looking for lasting income. It implies the dividend is not a burden on the company's funds but instead a well-maintained part of its capital distribution approach.
Foundational Strength: Profitability and Financial Health
A lasting dividend needs a firm operational base. The screening standards of good earnings power and condition are vital because they evaluate the company's capacity to produce the profits that pay for the dividend and its endurance in handling economic shifts. Genpact performs well on both counts, giving fundamental backing for its dividend plan.
Profitability Measures: Genpact receives a high ChartMill Profitability Rating of 8. The company regularly produces profit and positive operational cash flow. Its return figures are particularly strong, with a Return on Invested Capital (ROIC) of 14.13% and a Return on Equity (ROE) of 23.12%, both placed in the best group of its industry competitors. Also, its operational margin has gotten better in recent years. This high degree of earnings power means the company is using its capital effectively to create profits, which then supplies the basic source for dividend distributions.
Financial Condition Review: Just as critical is the company's balance sheet fortitude, shown in a ChartMill Health Rating of 8. Genpact displays no liquidity issues, with a current and quick ratio over 2, signaling more than enough means to meet immediate responsibilities. Its debt position is also good. While it has some debt, the amount is acceptable, and an important figure, Debt to Free Cash Flow, is a very good 1.69, meaning it could in theory clear all its debt with under two years of cash flow. An Altman-Z score far from the trouble area gives more proof of the company's financial steadiness. For a dividend investor, this health rating indicates the company is not excessively indebted and is set to continue its activities and dividend through different market environments.
Valuation Context
From a price standpoint, Genpact seems fairly valued, which can be a good starting opportunity for income investors. The stock sells at a Price-to-Earnings (P/E) ratio near 10.3 and a forward P/E of 9.3, which is below both the S&P 500 and the average for its sector. When paired with its high earnings power and anticipated profit growth in the low double digits, the valuation offers a situation where an investor is buying a financially sound, profitable operation with an increasing dividend at a price that does not appear to require extra cost.
A Complete Fundamental View
The examination above is combined in Genpact's complete fundamental report, which gives the stock a total rating of 7 out of 10. The report highlights the company's very good health and profitability ratings, its low price compared to similar companies, and its firm dividend rating. It states that Genpact might be valuable for more research for plans concentrating on value, dividend income, and quality.
For investors wanting to review other companies that satisfy similar standards of high dividend quality, good earnings power, and firm financial condition, the Best Dividend Stocks screen gives a changing list of possible choices. The screen can be adjusted further based on personal tastes for yield, company size, or other basic elements.
Disclaimer: This article is for information only and is not financial guidance, an endorsement, or a proposal or request to purchase or sell any securities. The information shown is from supplied data and should not be the only foundation for an investment choice. Investors must do their own complete investigation and think about their personal money situation and risk appetite before making any investment.
