ResMed Inc. (NYSE:RMD) Offers a High-Quality Dividend Backed by Strong Fundamentals

For investors looking for a dependable source of passive income, a methodical screening process is necessary to steer clear of high-yield dangers. One useful technique focuses on finding companies that provide an appealing dividend and also show the fundamental financial capacity to maintain and raise those payments. This method emphasizes quality and longevity over high yield numbers by themselves. By applying fundamental ratings that evaluate dividend quality, earnings power, and balance sheet soundness, investors can find companies prepared to provide steady returns across different market environments.

A clear example found through this process is ResMed Inc. (NYSE:RMD), a worldwide frontrunner in cloud-connected medical devices for sleep apnea, COPD, and other respiratory issues. The company's inclusion comes from strong scores in important fundamental categories, establishing it as an interesting option for portfolios focused on dividends.

A High-Quality Dividend Profile

The center of the screening process is a high ChartMill Dividend Rating, and ResMed receives a good 7 out of 10. This rating combines a number of important elements for dividend investors:

• Sustainable Payout Ratio: ResMed uses just 22.31% of its earnings for dividend payments. This low payout ratio is a key element of dividend security, creating a large cushion that lets the company keep its dividend during periods of lower earnings and finance new projects.
• Reliable Track Record: The company has paid and, notably, raised its dividend each year for over ten years. This proven record of consistency shows management's focus on giving capital back to shareholders.
• Consistent Growth: The dividend has increased at an average yearly rate of 6.33% over the last five years. This increase is backed by core business growth, confirming the raises are based on real progress.

While its present yield is not high, the mix of a very secure payout ratio, a lengthy growth record, and sound business basics fits well with an approach centered on lasting, increasing income instead of pursuing the highest, and frequently most dangerous, yields.

Supported by Outstanding Profitability

A lasting dividend needs to be paid for by a profitable company. This is why the screening rules also require a high ChartMill Profitability Rating, a category where ResMed performs very well with a score of 9. High profitability guarantees the company creates more than sufficient cash to pay its dividend comfortably.

Important profitability measures point to this capacity:

• Return on Invested Capital (ROIC): 20.50%, beating almost 98% of similar companies. This shows very effective use of capital to create earnings.
• Operating Margin: A notable 33.49%, putting it in the highest group of the Health Care Equipment industry. This shows strong pricing ability and operational effectiveness.
• Profit Margin: At 27.35%, it is much higher than most rivals.

These numbers verify that ResMed’s dividend is not a burden on its finances but is instead backed by a business with strong advantages that turns revenue into profit at a high rate. For dividend investors, this earnings power is a key protection, lowering the chance of a future reduction.

Strengthened by Sound Financial Condition

The third part of the screening process is financial condition, measured by the ChartMill Health Rating. ResMed gets an 8, showing a very strong balance sheet. A sound balance sheet gives the ability to withstand economic challenges without threatening the dividend.

ResMed’s financial capacity is clear in a few areas:

• Very Little Debt: A Debt/Equity ratio of 0.07 and a Debt-to-Free-Cash-Flow ratio of 0.38 are very low. The second figure means the company could eliminate all its debt in under five months using its existing cash flow.
• High Solvency: An Altman-Z score of 13.02 shows almost no bankruptcy danger and is higher than 92% of industry counterparts.
• Strong Liquidity: Current and Quick Ratios much above 2.0 indicate more than enough ability to handle near-term responsibilities.

This excellent financial situation means the dividend is protected from credit market pressures and gives the company significant resources to fund growth or buy back shares, which further helps per-share calculations.

Valuation and Growth Context

With a Valuation Rating of 5, ResMed is not a deeply discounted stock. Its P/E ratios are similar to or a bit lower than the wider market and meaningfully less expensive than its industry average, which carries a high premium. The company’s Growth Rating of 6 shows a good, though slowing, growth path, with past EPS growth around 15% per year and future projections still in the double digits. For dividend investors, this growth path is important as it backs the possibility for ongoing dividend raises, making the current price fair for a high-quality, growing business.

A Complete Fundamental View

The combined review from ResMed’s full fundamental report supports the reasoning for the screening process. The high Dividend Rating is not a single statistic but is founded on the base of outstanding profitability and very sound financial condition. This linked capacity is what dividend investors need to find: a company that can dependably pay now while having the financial strength and management to increase those payments later.

For investors wanting to review other companies that fit this balanced standard of good dividends, earnings power, and financial condition, the Best Dividend Stocks screen offers a changing beginning point for more study.

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Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment plan. The review uses data and ratings from ChartMill, which can change. Investors must perform their own detailed study and think about their personal financial situation and risk appetite before making any investment choices.