SUZANO SA (NYSE:SUZ): A High-Yield Dividend Stock with Strong Financials and Growth Potential

Dividend investors frequently look for a mix of yield, sustainability, and financial strength when choosing stocks. A method to find strong options involves screening for firms with high dividend ratings while ensuring good profitability and stability. SUZANO SA - SPON ADR (NYSE:SUZ) stands out as a possible choice under this approach, displaying a blend of appealing dividend traits and solid financials.

Dividend Strength: Yield and Growth

SUZANO SA provides a dividend yield of 3.95%, higher than the S&P 500 average of 2.39%. Though not the top yield in its field, it holds its own in the Paper & Forest Products sector, where the average is 4.29%. Notably, the firm has shown a steady annual dividend growth rate of 20.94% in recent years, signaling a focus on raising shareholder returns.

Sustainability is critical for dividend investors, and SUZANO’s payout ratio of 32.13% indicates its dividends are well-supported by earnings. This low ratio helps protect against earnings fluctuations, lowering the chance of future cuts. The company has also paid dividends for at least 10 straight years, highlighting its dependability as an income source.

Profitability: Strong Margins and Returns

The firm’s ChartMill Profitability Rating of 7 reflects its consistent earnings. Key points include:

• Operating Margin of 25.74% (leading its sector)
• Return on Equity (ROE) of 18.14%, better than 77.78% of competitors
• Gross Margin of 37.73%, showing effective cost control

These figures suggest SUZANO can maintain its dividend and potentially grow payouts if earnings rise.

Financial Health: Liquidity vs. Leverage

While the company’s ChartMill Health Rating of 5 raises some flags, mainly due to its high debt (Debt/Equity ratio of 2.20), its liquidity remains strong. The Current Ratio of 3.16 and Quick Ratio of 2.48 show it can handle short-term obligations. Still, investors should watch its long-term debt, especially with a Debt-to-Free Cash Flow ratio of 17.09, implying a slow repayment timeline.

Valuation: Reasonably Priced

From a value standpoint, SUZANO looks attractive:

• P/E ratio of 8.72, below sector (54.71) and S&P 500 (26.73) averages
• Forward P/E of 6.15, reinforcing the case for being undervalued
• PEG ratio hinting at fair pricing for future earnings growth

Conclusion

SUZANO SA makes a strong case for dividend investors, offering a good yield, growing payouts, and solid earnings. While its debt is a concern, its liquidity and profitability provide some safety. For those seeking income and stability in the materials sector, SUZANO is worth a closer look.

For more high-dividend stock ideas, check out the full Best Dividend Stocks screen.

Disclaimer: This article is not investment advice. Always conduct your own research or consult a financial advisor before making investment decisions.