Thomson Reuters Corp (NASDAQ:TRI): A High-Yield Dividend Stock Built for Sustainability

For investors wanting a steady source of passive income, a methodical screening strategy is necessary. One useful method is to look for companies that provide a good dividend now and also have the basic financial soundness to maintain and possibly raise those payments in the future. This means selecting for stocks with a high dividend rating, which assesses yield, growth, and sustainability, while also needing acceptable scores for profitability and financial soundness. This layered screen helps bypass the danger of high-yield stocks that could be hiding basic business problems, targeting instead good companies that can consistently benefit shareholders.

THOMSON REUTERS CORP (NASDAQ:TRI) appears as a notable candidate from this kind of screening process. The worldwide supplier of news and information for professional markets shows a profile that fits the main principles of careful dividend investing.

A Notable Dividend Profile

The main attraction of TRI for income-oriented investors is found in its strong dividend traits, which are shown in its high ChartMill Dividend Rating of 8 out of 10. A look at the fundamental analysis report shows the details:

• Good Yield: TRI presently has a yearly dividend yield of 6.25%. This is much greater than the industry average of 1.58% and over three times the S&P 500's average yield of about 2.00%. For an investor, this means a considerable initial income from the holding.
• Dependable and Increasing Payout: The company has built a dependable history, having paid dividends for at least ten straight years. Also, it has shown a dedication to raising shareholder returns, with an average yearly dividend growth rate of 8.41% over the last five years.
• Maintainable Payout Ratio: Sustainability is important, and TRI's dividend seems workable. The company uses about 58% of its earnings for dividend payments. While this is elevated, it is usually seen as maintainable, particularly when combined with positive earnings growth. The report states that TRI's earnings are increasing quicker than its dividend, which helps the argument for ongoing dividend growth without pressuring finances.

Supporting Basics: Profitability and Soundness

A high dividend is only as reliable as the business behind it. This is why the screening rules call for acceptable scores in profitability and financial soundness, to confirm the dividend is not a temporary sign of a troubled company. TRI performs adequately here, also.

Profitability Soundness: TRI gets a good Profitability Rating of 7. The company is regularly profitable with good cash flow production. Important margins are especially notable:

• An operating margin of 29.45% puts it in the best group of its industry, doing better than 96.5% of similar companies.
• A profit margin of 23.77% is also very good, doing better than 93% of the industry.

These high margins point to a business with pricing ability and effective operations, giving a wide buffer to safeguard earnings, and therefore the dividend, during economic slowdowns.

Sufficient Financial Soundness with a Note: TRI gets a Health Rating of 6, pointing to a mostly good but not perfect balance sheet. The good points are solid:

• Solvency is strong: The company has a very low debt-to-free-cash-flow ratio of 1.33, meaning it could pay off all its debt in just over a year from its cash flow. Its Altman-Z score of 7.26 shows no bankruptcy danger.
• Debt amounts are workable: A debt-to-equity ratio of 0.16 shows little dependence on debt financing.

However, investors should be aware of one area of attention: liquidity. TRI's current and quick ratios are both 0.61, which is low and indicates the company might have difficulty meeting immediate obligations without using outside cash or existing credit lines. While the solid solvency measures reduce long-term danger, this is a factor to watch.

Valuation and Growth Setting

It is necessary to see the dividend story within the complete investment context. TRI is now priced highly on standard measures, with a P/E ratio of 34.5, above both its industry and the wider market. This high valuation is probably a result of its high-quality, defensive business model and good profitability. Growth is consistent rather than remarkable, with revenue predicted to grow about 7% yearly and EPS projected to grow over 10%. For a dividend investor, this moderate growth profile combined with high profitability can be suitable, as the main objective is income steadiness and growth, not high capital gain.

Is TRI Suitable for a Dividend Portfolio?

Thomson Reuters makes a good argument for review in a dividend-oriented portfolio. It joins a high, well-supported, and increasing yield with the basic signs of a lasting business: outstanding profitability and good long-term solvency. The screening method that found TRI, focusing on a high dividend rating along with acceptable health and profitability, successfully brings out these traits. The strategy's aim is to sort out dangerous, high-yield pitfalls and reveal companies like TRI, where the dividend is backed by a truly sound basic company.

For investors wishing to do their own study and find other companies that match similar methodical standards, the Best Dividend Stocks screen is a good beginning point. It gives a changing list of stocks that meet the filters for high dividend quality, profitability, and financial soundness.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer 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 due diligence and consult with a qualified financial advisor before making any investment. Past performance is not indicative of future results.