For investors aiming to build a portfolio that produces steady passive income, a strict screening process is necessary. One useful technique is to concentrate on stocks that provide a good dividend now and also show the basic financial soundness to maintain and possibly raise those payments in the future. This method frequently includes selecting for companies with a strong total dividend rating, which evaluates yield, growth, and stability, while also checking they hold fair scores for profitability and financial soundness. This pairing helps to sidestep the risk of a high yield that only reflects a falling stock price or a payment that cannot last.
LEVI STRAUSS & CO-CL A (NYSE:LEVI) appears as a candidate that matches this strict screening plan. The famous jeans maker shows a profile that mixes income creation with basic business quality, making it a notable idea for portfolios focused on dividends.
Dividend Profile: A Mix of Yield and Growth
The main attraction for an income investor is found in LEVI's dividend traits, which are shown in its good ChartMill Dividend Rating of 7 out of 10. A more detailed view of the detailed fundamental report shows the parts of this score:
- Good Yield: The stock gives a yearly dividend yield of 2.76%. This is higher than the industry average of 1.44% and also exceeds the wider S&P 500's present yield of about 1.80%. For an investor, this means the income produced from LEVI is above the standard for both its sector and the overall market.
- Strong Growth Path: Apart from the current yield, LEVI has shown a clear dedication to raising shareholder payments. The dividend has increased at a yearly rate of 27.50% over the last five years, a time when it has not cut the payment. This record of steady growth is a good sign for future income.
- Lasting Payout: Stability is important, and here LEVI displays a careful method. The company pays about 37% of its income as dividends. This is a manageable and lasting payout ratio, keeping enough kept earnings to put back into the business for future growth without risking the dividend.
Supporting Basics: Profitability and Financial Soundness
A strong dividend rating by itself is insufficient; it needs to be backed by a sound business. This is why the screening rules also require fair profitability and soundness ratings. LEVI does very well in profitability, getting a top rating of 9, while its financial soundness score is an acceptable 5.
- Very Good Profitability: LEVI's business model is very effective. Important measures highlight this soundness:
- Return on Equity (ROE): At 25.37%, LEVI's ROE is better than 84% of similar companies in the Textiles, Apparel & Luxury Goods industry, showing very good use of shareholder money.
- Profit Margins: With a Net Profit Margin of 9.20% and a Gross Margin over 61%, the company keeps high profitability compared to most industry rivals. Good and improving margins supply the earnings that finally pay for the dividend.
- Sufficient Financial Soundness: With a Soundness rating of 5, the company's balance sheet shows no serious warnings but does have points to watch. Good aspects include a workable Debt/Equity ratio of 0.46 and a reducing debt-to-assets ratio. The main point of care relates to liquidity; the company's Quick Ratio is under the industry average, meaning it holds less cash and similar assets compared to short-term debts. However, its good profitability and cash flow production help balance this point for long-term dividend stability.
Valuation and Growth Setting
For a dividend stock, good valuation makes sure the investor is not paying too much for that income, while acceptable growth expectations support future dividend raises.
- Fair Valuation: LEVI seems fairly priced, with a P/E ratio of 15.80 and a Forward P/E of 14.21. Both numbers are lower than the wider S&P 500 and a majority of its industry peers, indicating the stock is not priced too high.
- Steady Growth View: Analysts predict earnings will increase at almost 18% each year in the near future, with revenue growth expected around 6%. While this is a reduction from the very high EPS growth of the past five years, it still shows a sound view that can support continued, though possibly more measured, dividend growth.
Conclusion
LEVI STRAUSS & CO makes a strong case for dividend investors using a mixed screening approach. It provides a yield that is above normal for its sector and the market, along with an excellent record of dividend growth and a lasting payout ratio. These good income traits are strongly supported by very good profitability measures and a sufficiently sound balance sheet. The stock's fair valuation and steady growth view further complete the profile, suggesting it is not an income choice that sacrifices business quality or future possibility.
For investors wanting to use this same strict plan to find other possible options, the fully set Best Dividend Stocks screen is ready to review and adjust further.
Disclaimer: This article is for information only and does not form financial advice, a suggestion, or an offer to buy or sell any security. Investing carries risk, including the possible loss of original money. You should do your own study and talk with a qualified financial advisor before making any investment choices.
