Jack Henry & Associates Inc. (NASDAQ:JKHY): A Quality Dividend Stock for Long-Term Income

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 choices. A frequent method includes looking for companies that provide a good dividend and are also based on financial soundness and steady earnings. This method emphasizes quality and lasting power over seeking the highest available yield, with the goal of creating a portfolio of companies able to keep and increase their payments through different economic periods. By employing tools that assess dividend safety, earnings, and general financial soundness, investors can methodically find candidates deserving of more examination.

One company that comes up from such a quality-oriented dividend filter is JACK HENRY & ASSOCIATES INC (NASDAQ:JKHY), a supplier of technology solutions and payment processing services mainly to banks and credit unions. The company’s presence on a filter for high dividend ratings together with good earnings and soundness scores indicates it may have the traits dividend investors seek: a dependable payment supported by a strong business model.

Dividend Dependability and Increase

The center of any dividend investment case is the lasting power and direction of the payment itself. Jack Henry & Associates shows several favorable traits here, which add to its solid ChartMill Dividend Rating of 7 out of 10.

• History of Steadiness: The company has built a dependable history, having paid a dividend for at least ten straight years without a cut. This record is a vital sign of management’s dedication to giving capital back to shareholders.
• Manageable Payout Ratio: A crucial measure for dividend safety is the payout ratio, the part of earnings paid as dividends. JKHY’s ratio is at a manageable 34.69%, meaning the company keeps a large part of its income for reinvestment and expansion. This gives a good cushion, making sure the dividend is well-supported and not in immediate danger from a short-term earnings drop.
• Constant Dividend Increase: The dividend has increased at an average yearly rate of about 6.38% over the last five years. Significantly, this increase is backed by even higher earnings growth, showing the raises are lasting and not pressuring the company’s finances.

While its present dividend yield of 1.25% is moderate next to some high-yield industries, it is a result of the company’s share price performance and increasing earnings. For a plan focused on dividend increase and capital protection over the long run, this outline of a moderate but dependably growing payment from a financially solid company can be more attractive than a high but possibly unsteady yield.

Basis of Earnings and Financial Soundness

A lasting dividend cannot exist without a profitable and financially stable business behind it. This is exactly why filtering for strong earnings and soundness ratings is a key part of the method. Jack Henry does very well in these areas, getting an Earnings Rating of 8 and a Soundness Rating of 8.

The company’s earnings measures are notable, especially its effectiveness in using capital:

• Return on Invested Capital (ROIC) of 17.79% is much higher than the industry average and is above the company’s own three-year average, pointing to better capital use.
• Return on Assets (15.77%) and Return on Equity (22.11%) are both near the top in its financial services industry group.
• It has reported positive earnings and operating cash flow in every one of the past five years, showing steady operational results.

From a financial soundness view, JKHY shows a very clean balance sheet, which is a major plus for dividend lasting power:

• The company has almost no debt, with a Debt-to-Equity ratio of 0.01. This removes interest cost risk and gives great flexibility.
• Its Altman-Z score of 12.29 shows very low near-term bankruptcy risk and is much higher than industry averages.
• With good liquidity ratios, the company is in a good position to meet its short-term responsibilities.

This pairing of high earnings and a very strong balance sheet forms the perfect basis for a safe and increasing dividend, as the company produces plenty of cash without being weighed down by debt responsibilities.

Price and Expansion Factors

While the dividend, earnings, and soundness profile is strong, a full study requires examining price and expansion outlook. The fundamental report states that JKHY is trading at a high price, with a Price-to-Earnings ratio of 28.05 and a Forward P/E of 26.14. This implies the market has already accounted for much of the company’s quality and stability. Its expansion profile is steady rather than fast, with past revenue and earnings per share growth in the high-single to low-double digits, and similar rates projected for the future.

For a dividend investor, this creates a balance. The high price may reduce short-term capital gain possibility and leads to a lower beginning yield. However, the exceptional quality of the business, its competitive place in a stable industry, outstanding earnings, and clean balance sheet, supports a high price for investors whose main aim is the safety and predictable growth of income over many years.

A Detailed Look at the Fundamentals For a full summary of the study behind these ratings, you can examine the complete ChartMill Fundamental Report for JKHY.

Conclusion

Jack Henry & Associates represents the kind of company a quality dividend filter is made to find. It may not provide the striking yield of a more risky stock, but it gives what many dividend investors prize most: a shown dedication to shareholders through ten years of dependable payments, a lasting and growing dividend supported by strong earnings, and a core business of exceptional financial soundness and earnings. This profile makes JKHY a possibility for investors creating a "buy-and-forget" income portfolio focused on long-term dividend increase and capital protection.

Looking for more quality dividend ideas? The filter that found JKHY is a beginning point for more study. You can look at the present list of stocks fitting similar standards for high dividend ratings, earnings, and financial soundness by visiting 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 securities. The analysis is based on data and ratings provided by ChartMill, which evaluates past and current fundamental data. Investors should conduct their own thorough research and consider their individual financial situation and risk tolerance before making any investment decisions. Past performance is not indicative of future results.