For investors looking for a dependable source of passive income, a methodical screening process is vital to distinguish truly lasting dividend payers from those with high yields that could be unstable. A typical approach focuses on finding companies that provide a good dividend and are also established on a firm financial base. This involves selecting stocks with good profitability measures, which show the company generates sufficient funds to support its distributions, and sound financial condition, which implies it can endure economic challenges without threatening the dividend. By emphasizing these elements together with a high dividend score, investors can create a portfolio intended for income reliability and lasting capital protection.
An Examination of Tenaris SA-ADR (NYSE:TS)
Tenaris SA-ADR (TS) is a worldwide producer and supplier of steel pipe products, mainly for the oil and gas industry with its oil country tubular goods (OCTG). The company works in important areas such as North and South America, Europe, and the Middle East. As a business tied to energy sector investment cycles, its financial results can vary, which makes the basic sturdiness of its balance sheet and activities especially significant for dividend investors.
Dividend Profile: Good Yield with a Dependable History
The main attraction for income investors is the dividend from Tenaris, which receives a solid 7 out of 10 on the ChartMill Dividend Rating. This rating combines important measures into one, practical score.
- Considerable Yield: The stock now provides a yearly dividend yield of 4.09%. This is over two times the average yield of the S&P 500 (about 1.87%) and is notably higher than its own Energy Equipment & Services industry, which has an average yield of only 1.28%.
- Record of Increase: The company has distributed dividends for at least ten years, creating a dependable history, and it has also raised its payment at a notable yearly rate of 10.42% over the last five years. Also, it has not lowered its dividend in the past three years, a significant indicator of management's dedication to shareholders.
- Sustainability Factor: The payout ratio, which displays the part of earnings given as dividends, is 44.97%. This is elevated but normally stays within a manageable area, showing the dividend is supported by current earnings without pressuring the company's funds.
The Basic Sturdiness: Profitability and Financial Condition
A high yield by itself can be misleading if the company's foundations are poor. This is where Tenaris stands apart, displaying the "acceptable profitability and condition" that the screening method aims to confirm.
- High Profitability (Rating: 9/10): Even with recent industry pressures, Tenaris stays very profitable compared to similar companies. Its profit margin of 16.91% and return on assets of 9.77% are among the best in its field. Good margins are essential for a dividend stock, as they supply the earnings capacity needed to sustain and possibly increase payments over time, even when sales increase slows.
- Superior Financial Condition (Rating: 10/10): The company's balance sheet is very sturdy. With a very low debt-to-equity ratio of 0.01 and a high current ratio of 4.08, Tenaris has significant liquidity and almost no debt worries. An Altman-Z score of 6.01 clearly positions it away from any bankruptcy risk area. For a dividend investor, this very strong balance sheet is critical; it means the company can easily manage its responsibilities and finance its dividend during industry low periods without requiring to assume too much debt or reduce the payment.
Valuation and Growth Background
The stock seems fairly valued, with a Price/Earnings ratio of 10.08, which is low compared to both the wider market and similar companies. This valuation offers a safety buffer for investors. It is significant to recognize, however, that the company's growth rating is poor (3/10), reflecting anticipated short-term lack of movement in earnings and sales, a typical trait in the present stage of its industry cycle. This highlights why the screening emphasis on profitability and condition is so important; these qualities support the dividend while the company manages a slower growth time.
Is It Suitable for a Dividend Portfolio?
Tenaris SA-ADR makes a strong argument for dividend-oriented investors. It joins a better-than-average yield with a history of dividend increases, all supported by first-rate profitability and a very sturdy balance sheet. This description matches well with a method that looks for income reliability from companies structured to survive economic and industry-specific cycles. The present valuation contributes another element of attraction. Investors are basically receiving a 4% yield to own a financially sound industry leader while anticipating the next industry upswing.
For investors wanting to examine other companies that satisfy similar standards of high dividend quality, good profitability, and sound financial condition, you can see the full screen results here: Best Dividend Stocks Screen.
Disclaimer: This article is for information only and does not form financial guidance, a suggestion, or a proposal to purchase or sell any security. The examination uses supplied data and shows conditions when written. Investors should perform their own investigation and think about their personal financial situation and risk appetite before making any investment choices.
