JACK HENRY & ASSOCIATES INC (NASDAQ:JKHY) – A Reliable Dividend Stock with Strong Profitability and Financial Health

Dividend investors frequently look for a mix of steady income and financial security, making it useful to filter for stocks with high dividend ratings, strong profitability, and stable balance sheets. One stock that fits these conditions is JACK HENRY & ASSOCIATES INC (NASDAQ:JKHY), a company specializing in financial technology, offering payment processing and core banking services. Using a dividend-focused filter, which requires a minimum ChartMill Dividend Rating of 7, along with profitability and financial health scores of at least 5, JKHY stands out as a strong option for income-focused investors.

Dividend Strength: Consistency and Expansion

JKHY’s ChartMill Dividend Rating of 7 highlights its balanced dividend approach, blending yield, growth, and reliability:

• Dividend Growth: The company has raised its dividend by an average of 6.79% annually over the past five years, showing a dedication to shareholder returns as earnings grow.
• Payout Ratio: At 37.87%, JKHY’s payout ratio is manageable, providing flexibility to sustain or increase dividends without pressuring cash flow. This matches the filter’s focus on long-term sustainability, a key factor for dividend investors.
• Track Record: JKHY has distributed dividends for at least 10 straight years without cuts, reinforcing its dependability.

While its 1.41% yield is lower than some high-yield stocks, it offers lower risk and steady growth, fitting a strategy that values reliable payouts over high but uncertain yields.

Profitability and Financial Health: Supporting Dividends

A dependable dividend relies on a company’s ability to maintain it. JKHY’s Profitability Rating of 8 and Health Rating of 8 highlight its financial strength:

• Profitability: The company reports a Return on Invested Capital (ROIC) of 16.61%, better than 93% of its peers in financial services. Its operating margin (23.22%) and profit margin (18.50%) further demonstrate operational efficiency.
• Balance Sheet Stability: With a low Debt/Equity ratio of 0.04 and an Altman-Z score of 10.91 (indicating minimal bankruptcy risk), JKHY’s financial condition supports continued dividend reliability.

These metrics confirm the filtering method: profitability ensures dividends are backed by real earnings, while financial health reduces the chance of cuts during economic challenges.

Valuation and Growth Factors

JKHY trades at a P/E ratio of 27.52, slightly above its industry average, reflecting its premium status. However, its PEG ratio (factoring in growth) suggests reasonable pricing, especially given its 12.69% projected EPS growth. Revenue growth has been consistent at 7.37% per year, supporting potential dividend hikes.

Final Thoughts

For dividend investors, JKHY offers a combination of moderate yield, reliable growth, and minimal financial risk, aligning with a disciplined income-focused approach. While not the highest-yielding option, its consistency and solid fundamentals make it a suitable choice for portfolios emphasizing sustainability over short-term income gains.

For more dividend stock ideas filtered using similar standards, check the Best Dividend Stocks screener.

Disclaimer: This article is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.