NKE (NYSE:NKE) Offers a High-Quality Dividend Backed by Strong Fundamentals

For investors looking for a dependable source of passive income, a methodical screening strategy is necessary. One useful method is to concentrate on companies that provide a good dividend now and also have the basic financial soundness to maintain and raise those payments. This means selecting for stocks with a high dividend rating, which looks at yield, growth, and sustainability, while also needing acceptable scores for profitability and financial soundness. This multi-step screening process aids in finding companies where the dividend is backed by a strong business model, instead of being a temporary sign of a low stock price.

NIKE INC -CL B (NYSE:NKE) appears as a notable candidate from this type of screen. The worldwide athleticwear company receives a good overall fundamental rating, but its attraction for dividend-oriented investors comes from particular attributes that match a careful, long-term income plan.

A Good Dividend Profile

Nike’s dividend traits are a main attraction. The company shows the signs of a steady dividend payer, which is important for investors who value regularity and increase in their income holdings.

• Steady History and Increase: Nike has built a reliable past, having paid and, critically, raised its dividend for at least ten straight years. This shows a management dedication to giving capital back to shareholders. The dividend itself has increased at a notable average yearly rate of about 10.7% over this time, greatly exceeding inflation and adding to real income gain for long-term owners.
• Good Yield: With a present yield of 2.44%, Nike gives an income return that is above both its industry average (1.46%) and the wider S&P 500 average. For a company of its market size and growth history, this yield is appealing and supplies a real return while investors anticipate price gain.
• Future Continuation: A vital test for any dividend investor is if the payment can be kept up. While Nike’s present payout ratio is high, the basic study shows that its earnings are forecast to rise quicker than its dividend. This situation is important, as it implies the company can finance its planned dividend increase from growing profits, bettering the continuation of the payout ratio over time.

The Basic Support: Profitability and Soundness

A high dividend rating by itself can be incomplete if not supported by a stable business. This is why the screening rules demand acceptable profitability and soundness scores, to make sure the dividend is not endangered by business frailty or balance sheet pressure. Nike scores well on both areas, giving a stable base for its shareholder payments.

• Strong Profitability: Nike gets a good profitability rating of 7. Important measures like Return on Equity (21.5%) and Return on Invested Capital (10.87%) place in the high levels of its industry, showing very efficient use of capital. The company has also been regularly profitable with positive cash flow each year for the past five years. This business quality creates the cash needed to pay dividends, put money back into the business, and handle economic changes.
• Stable Financial Soundness: With a soundness rating of 7, Nike’s balance sheet is firm. The company has a good liquidity situation, with a Quick Ratio showing no issue meeting near-term needs. Its ability to pay debt is also stable, with an Altman-Z score not near trouble levels and a workable amount of debt compared to its free cash flow. A sound balance sheet means Nike is less probable to have to reduce its dividend during a slump to save cash.

Price and Growth Points

While the dividend argument is good, a complete view needs examining other elements. Nike is presently priced at a high level, with a Price-to-Earnings ratio above the market average. This shows the market’s price for its strong brand, global presence, and steady results. For dividend investors focused only on yield, this high price may be a point. However, it is partly explained by the company’s quality and its predicted earnings growth of over 12% each year, which backs the idea for future dividend raises.

A complete look at all these basic elements is in the full ChartMill Fundamental Analysis Report for NKE.

Conclusion

For investors using a strategy that focuses on lasting income, Nike offers a balanced case. It successfully meets a filter looking for high dividend quality supported by basic soundness. The company gives a good and increasing yield backed by a ten-year history, all while being driven by a profitable global business and a firm financial setup. While its price is high, it is supported by the very traits, brand strength, efficient operations, and predicted growth, that make its dividend seem safe and set for future increase.

This study of Nike came from a methodical screen for quality dividend payers. To see the full list of stocks that now meet these rules of high dividend rating, acceptable profitability, and stable financial soundness, you can use the Best Dividend Stocks screen yourself.

Disclaimer: This article is for information only and does not make up financial advice, a suggestion, or an offer or request to buy or sell any securities. The study is based on present data and past results, which is not a guide for future outcomes. Investors should do their own study and talk with a qualified financial advisor before making any investment choices.