For investors looking for a dependable source of passive income, a methodical screening strategy is necessary. One useful technique focuses on companies that provide a good dividend and are also established on a firm financial base. This method favors stocks with a high ChartMill Dividend Rating, which assesses yield, growth, history, and sustainability. Importantly, it combines this with basic requirements for profitability and financial condition ratings. This confirms the dividend is not a temporary illusion resulting from a falling share price or unmaintainable distributions, but is rather backed by a sound and well-managed company. By using this layered screen, investors can find companies such as ResMed Inc (NYSE:RMD) for more detailed review.
A Dividend Established on Quality and Growth
ResMed’s attraction for dividend-oriented investors starts with its good overall fundamental condition, which received a score of 7 out of 10 in its detailed fundamental analysis report. The report points out that RMD "scores very well on both the profitability and health sections," creating a firm base for a dependable income stock. This base is important for the dividend plan, as a company needs to produce steady profits and keep a solid balance sheet to maintain and raise its shareholder payments over many years.
- Profitability Leader: ResMed’s profitability score is a notable 9/10. Important figures like Return on Invested Capital (20.50%) and Operating Margin (33.49%) place in the best group of its Health Care Equipment & Supplies industry. A very profitable company has sufficient earnings to support its dividend, lowering the chance of a reduction during economic slowdowns.
- Financial Strength: With a health score of 8/10, the company shows notable financial soundness. Its Altman-Z score of 13.06 suggests almost no bankruptcy danger, and a very low Debt/Equity ratio of 0.07 shows a careful balance sheet. This financial condition offers a margin of safety, confirming the company can meet its commitments and keep financing its operations, and its dividend, without difficulty.
Assessing the Dividend Offering
While ResMed’s present dividend yield of 0.94% is moderate next to the wider S&P 500 average, the quality and direction of its dividend program are what make it notable under the screening rules. The ChartMill Dividend Rating of 7/10 shows a good score in the parts most important to long-term income investors: growth, history, and sustainability.
- A Dependable and Increasing Payment: ResMed has built a reliable history, having paid and raised its dividend for at least ten straight years. The dividend has increased at a good yearly rate of 6.33% over this time. For dividend-growth investors, this steady yearly increase can meaningfully improve effective yield over time and helps guard income against inflation.
- Maintainable from a Position of Soundness: The sustainability of the dividend is likely its most notable characteristic. The payout ratio is at a very manageable 22.31% of earnings, meaning the company keeps most of its profits for reinvestment and expansion. Also, the fundamental report states that "RMD's earnings are growing more than its dividend," which is a main sign that the present growth rate is maintainable. This low payout ratio gives a large cushion, letting the dividend be kept even if earnings experience short-term stress.
Valuation and Growth Setting
No review is finished without looking at price and future outlook. ResMed’s valuation score is a neutral 5/10. While its Price-to-Earnings ratio of 26.03 seems high alone, it is actually fair compared to both its own high-quality profile and its industry group. The company is also anticipated to provide good, though slowing, growth with EPS and Revenue forecast to rise by about 10% and 8% each year, in that order. This growth backs the argument for future dividend raises and offers a possible reason for share price growth next to the income part.
A Leading Choice for a Quality Dividend Plan
ResMed Inc shows the kind of company a methodical dividend screening strategy tries to find. It looks past a seemingly high yield to find a business where the dividend is a result of outstanding operational performance and financial management. The high profitability and health scores verify the company’s basic quality, while the dividend score confirms a shareholder-friendly policy that is both dependable and set for continued growth. For investors focusing on a maintainable and increasing income stream from a financially stable company, RMD deserves careful thought.
This review of ResMed came from a systematic screen for high-quality dividend payers. Investors can examine the complete list of stocks that meet similar strict filters by seeing the Best Dividend Stocks screen.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The information presented is based on data provided and should not be the sole basis for any investment decision. Investors should conduct their own independent research and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.
