Travel + Leisure Co. (NYSE:TNL) Emerges as a Sustainable Dividend Stock for Income Investors

For investors looking for a dependable source of passive income, a methodical screening process can help find companies that provide more than a high stated yield. The aim is to locate businesses with lasting payouts, backed by firm basic financials. One useful technique is to sort for stocks with a good ChartMill Dividend Rating, which assesses yield, growth, history, and payout security, while also confirming the company keeps acceptable scores in earnings and financial soundness. This method tries to steer clear of "yield traps," companies with unmaintainably high dividends frequently caused by a troubled share price, and instead concentrates on firms able to keep and possibly raise their payments over time.

Travel + Leisure Co. (NYSE:TNL), a notable participant in the hospitality and vacation ownership field, recently appeared using such a dividend-centered screen. The company's basic profile indicates it may deserve additional examination from income-focused investors. The next sections explain why TNL seems to match the standards of secure dividend investing.

Dividend Profile: A Focus on Sustainability

The center of the screening process is a high Dividend Rating, and TNL receives a firm score of 7 out of 10. This rating is formed on several important elements that dividend investors value.

• Yield and Comparison: TNL provides a forward dividend yield near 3.05%. This is not the greatest yield possible, but it is substantial in present conditions. More significantly, it stacks up well against both its industry counterparts and the wider market. The yield is much higher than the average for the Hotels, Restaurants & Leisure industry (1.19%) and also exceeds the present S&P 500 average yield of about 1.85%.
• Reliable History: A lengthy and steady dividend history is a sign of a company attentive to shareholders. TNL has paid dividends for at least ten years, giving a record of dedication to returning capital to investors. The company has also not cut its dividend in the last three years, showing a measure of steadiness in its payment policy.
• Sustainable Payout Ratio: Possibly the most important number for dividend security is the payout ratio. TNL pays out about 36% of its net income as dividends. This is a manageable level, keeping a large part of earnings to be put back into the business for development, used to reduce debt, or kept as a cushion for weaker periods. A ratio this low implies the current dividend is secure and not in imminent danger.

Supporting Financial Health and Profitability

A high dividend rating by itself is insufficient; it must be supported by a company that is financially stable and run profitably. This is why the screening process includes minimum limits for Health and Profitability Ratings, both areas where TNL gets a 6.

• Financial Health (Rating: 6): TNL shows clear strength in liquidity, which is vital for handling near-term needs without difficulty. Its Current Ratio of 3.79 and Quick Ratio of 2.76 are very firm, doing better than over 90% of its industry counterparts. This shows sufficient resources to manage upcoming costs. Regarding long-term stability, the situation is varied. The company's Debt-to-Free-Cash-Flow ratio is high at 11.05, indicating a considerable debt amount compared to its cash production. Still, this level is viewed as similar to the industry average, and the company's Altman-Z score, while in a watchful "grey zone," remains higher than most others in its field.
• Profitability (Rating: 6): A company must earn money to finance dividends reliably. TNL displays firm earnings measurements. Its Return on Invested Capital (ROIC) of 10.73% and Profit Margin of 10.36% are both good, performing better than about three-fourths of the industry. This shows effective use of capital and sound earnings ability. While margins have faced some recent reduction, the basic earnings support the dividend.

Valuation and Growth Context

From a price standpoint, TNL makes an interesting case. Its Price-to-Earnings (P/E) ratio of 11.5 and Forward P/E of 9.9 are seen as fair and are noticeably lower than both the industry average and the wider S&P 500. This price, paired with a good dividend yield, can be interesting for value-aware income investors.

Growth is the area where TNL shows more moderate scores, with a Growth Rating of 4. Previous revenue and earnings growth have been small. However, analysts forecast a pickup, with earnings per share predicted to increase by over 13% each year in the next few years. If this happens, this better growth could give more backing for dividend steadiness and possible future raises.

Conclusion

Travel + Leisure Co. stands as a possible option for dividend investors applying a measured screening system. It gives a yield that is interesting compared to its market and industry, supported by a maintainable payout ratio and a ten-year payment record. These dividend positives are supported by sufficient profitability and very firm liquidity, though investors should note the company's debt amounts. The stock also sells at a price that seems reasonable. For those constructing an income-centered portfolio, TNL shows the kind of company that can be found by looking past basic yield to the fundamental soundness of the business.

Interested in finding more stocks that match this methodical dividend method? You can see the full list of outcomes from the "Best Dividend" screen here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. The analysis is based on current data and ratings, which are subject to change. Investors should conduct their own thorough research and consider their individual financial situation and risk tolerance before making any investment decisions.