For investors aiming to create a portfolio centered on steady income, a methodical screening process is necessary. One useful technique is to look for companies that provide a good dividend now and also have the fundamental financial soundness to maintain and raise those payments in the future. This means selecting for stocks with high dividend ratings, which assess yield, growth, and sustainability, while also demanding acceptable scores for profitability and financial condition. This multi-step method helps sidestep the danger of high-yield traps, companies where large payouts could be at risk from poor earnings or high debt, and instead finds firms structured to compensate shareholders reliably.
IDEX CORP (NYSE:IEX) appears as a prospect from this type of screening method. The company, which makes engineered products for fluidics, health sciences, and fire safety, displays a profile that matches the main principles of quality dividend investing.
A Firm Dividend Base
The main attraction for income investors is IDEX's dividend history and framework, which earns a firm 7 out of 10 in ChartMill's Dividend Rating. An examination of the fundamental analysis report shows the supports of this evaluation:
- Dependable History and Growth: IDEX has built a reliable history, having paid and raised its dividend for at least ten straight years. The dividend is rising at a good yearly rate of about 7%, showing a management dedication to giving more capital back to shareholders over time.
- Maintainable Payout: The company's payout ratio is near 44% of its earnings. This is an important measure; it shows more than half of its profits are kept for reinvestment in the business, offering a safe margin that indicates the current dividend level is stable and has potential for future raises.
- Notable Yield: With a yield of 1.42%, IDEX gives a better income flow than the typical company in its machinery field and does better than over 80% of similar companies on this point. While it is somewhat below the wider S&P 500 average yield, the mix of yield, growth, and safety creates an attractive package.
Backing Financial Condition and Profitability
A lasting dividend needs a sound business supporting it. This is why filtering for acceptable profitability and condition ratings is a key step in the process, it confirms the income flow is supported by a stable company. IDEX earns a 7 in both groups, giving that necessary base.
- Profitability Soundness: The company shows firm operational effectiveness. Its profit margin of almost 14% and operating margin over 20% place it with the leading performers in its field. While these margins have faced some recent reduction, they stay at high levels. Also, returns on assets and invested capital are firmly above the industry median, verifying the company's capacity to produce profits from its capital.
- Financial Stability: IDEX's balance sheet is in fine condition. Important solvency and liquidity measures are positive:
- A careful debt-to-equity ratio of 0.47 shows a balanced capital structure without high borrowing.
- Strong liquidity is shown by a current ratio of 2.93 and a quick ratio of 2.06, indicating good ability to meet short-term needs.
- An Altman-Z score of 4.92 points to a very small near-term chance of financial trouble.
These elements together mean the company has the financial room to manage economic changes while still paying its dividend, a required feature for long-term dividend investors.
Price and Growth Factors
While the dividend, condition, and profitability profile is firm, a complete study needs examining the price paid for these traits. IDEX's price rating is its weakest, at a 2 out of 10. The stock sells at a price-to-earnings ratio over 25, which is similar to both its field and the wider market but is not seen as inexpensive. This higher price is probably a result of its high-quality, defensive nature.
Growth is average, with past revenue and earnings per share growth in the mid-single digits. However, analysts forecast a pickup, with future EPS growth expected close to 9.5% each year. For a dividend investor, this expected growth is good as it backs the possibility for ongoing dividend raises.
A Prospect for Quality-Income Portfolios
IDEX CORP demonstrates the kind of company a systematic dividend screen intends to find. It gives more than just a yield; it provides a long-standing, increasing dividend backed by leading profitability and a very firm balance sheet. This mix addresses the central risk in dividend investing: the durability of the payout. The stock is not a deep-value choice, but for investors focusing on dependable and rising income from a financially stable business, it merits further review.
This review of IDEX came from a structured screening process. Investors wishing to investigate other companies that fit similar standards of high dividend quality, acceptable profitability, and financial condition can see 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. Investors should conduct their own research and consider their individual financial circumstances and risk tolerance before making any investment decision.
