For investors looking for a dependable source of passive income, a methodical screening process is necessary to distinguish solid dividend payers from possible value traps. A frequent method uses filters for companies that provide a good yield and show the financial capacity to maintain and raise their payments over time. This usually requires examining more than the stated dividend yield to evaluate core profitability, balance sheet condition, and the durability of the payout ratio. Using this kind of multi-factor filter, investors can create a watchlist of prospects that mix income creation with basic quality.
One company that appears from this methodical search is Travel + Leisure Co. (NYSE:TNL), the vacation ownership and exchange company. TNL makes a strong case for portfolios focused on dividends, as its basic profile matches the main standards of yield, durability, and financial strength.
Dividend Profile: A Mix of Yield and Dependability
For income investors, the dividend offering is the main draw, and TNL's proposition is established on a base of regularity and sensible growth.
- Good Current Yield: The stock provides a forward dividend yield near 3.15%. This is not the greatest yield possible, but it is notably higher than the S&P 500 average and compares well inside its Hotels, Restaurants & Leisure industry, doing better than 87% of similar companies on this measure.
- Established History: The company has built a dependable record, distributing dividends without interruption for more than ten years. This history gives investors trust in management's dedication to giving capital back to shareholders.
- Durable Payout: A vital test for any dividend stock is the payout ratio. TNL distributes close to 36% of its earnings as dividends, a rate viewed as very durable. This provides sufficient capacity to put money back into the business, handle economic slowdowns, and possibly raise the dividend later without pressuring finances.
- Moderate, Durable Growth: The dividend has increased at a yearly rate of about 2.5% over the last several years. This increase, while moderate, is backed by core earnings growth, showing it is not funded by debt or a declining balance sheet.
Supporting Basics: Profitability and Financial Condition
A good dividend assessment cannot stand alone; it needs a workable business. This is where the filter standards for "acceptable profitability and condition" are important, and TNL satisfies these tests.
Profitability Condition: The company gets a ChartMill Profitability Rating of 6, showing a good operational base.
- It has been regularly profitable with positive earnings and operating cash flow in recent years.
- Important efficiency measures are good, with a Return on Invested Capital (ROIC) of 10.73% that does better than almost 75% of industry competitors and is presently moving above its three-year average.
- Margins are sound, with an operating margin of 19.84% putting it in the top group of its industry.
Financial Condition Review: TNL gets a ChartMill Health Rating of 6, showing a typical but steady financial state.
- The company shows very good short-term liquidity, with current and quick ratios much higher than industry averages, indicating no trouble in meeting immediate responsibilities.
- Its solvency position, measured by numbers like the Altman-Z score, is within the industry average. While the debt-to-free-cash-flow ratio is high, it matches sector competitors. Importantly, the company has been lowering its share count and bettering its debt-to-assets ratio over the past year, which are good indicators for financial management.
Valuation and Growth Setting
From a valuation view, TNL seems fairly priced, which can be a significant element for total return. The stock trades at a P/E ratio of 11.5 and a forward P/E of 9.9, making it less expensive than about 85-88% of its industry competitors and the wider market. This valuation gives a buffer for income investors. Also, analysts forecast a rise in earnings per share (EPS) growth to near 13% each year in the next few years, which could back future dividend raises and possible price gains.
A Prospect for More Study
Travel + Leisure Co. shows the kind of stock a methodical dividend filter tries to find. It joins a respectable and well-supported yield with a long payment history, all supported by a profitable business model and a balance sheet with good liquidity. The fair valuation and positive earnings growth view add more levels of interest. For investors creating or adding to an income-producing portfolio, TNL justifies more examination as a possible prospect that mixes yield with basic quality.
Interested in finding more stocks that match this methodical dividend method? You can use the same "Best Dividend" filter applied to find TNL and see all present outcomes here.
For a complete explanation of the basic analysis behind the ratings discussed, you can see the full ChartMill Fundamental Report for Travel + Leisure Co. here.
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Disclaimer: This article is for information only and is not financial advice, a suggestion, or an offer to buy or sell any security. The information shown is based on supplied data and should not be the only foundation for an investment choice. Investors must do their own complete study and think about their personal financial situation and risk tolerance before making any investment.
