Xylem Inc (NYSE:XYL) – A Strong Dividend Stock with Steady Growth and Financial Health

When assessing stocks for dividend investing, a balanced method is important. The "Best Dividend Stocks" screen finds companies with solid dividend traits while keeping good profitability and financial strength, key elements in maintaining payouts over time. The screen selects stocks with a ChartMill Dividend Rating of at least 7, confirming strong dividend measures, along with minimum ratings of 5 for both profitability and financial health. This approach helps steer clear of high-yield traps—firms with payouts that may not last—while focusing on dependable income sources.

XYLEM INC (NYSE:XYL), a global water technology firm, matches this model. Its fundamental report points to several strengths that position it as a strong pick for dividend-focused portfolios.

Dividend Strengths

• Steady Growth: Xylem’s dividend has increased at an annual rate of 8.36% over the last five years, beating inflation and showing management’s dedication to rewarding shareholders.
• Dependable History: The company has distributed dividends for at least 10 straight years without cuts, a sign of consistency.
• Manageable Payout Ratio: At 39.55% of earnings, the payout ratio stays well below risky levels (usually >80%), allowing room for reinvestment and future raises.

While the current yield of 1.23% is lower than the S&P 500 average (~2.36%), the mix of growth and sustainability makes Xylem appealing for investors focused on long-term income growth.

Profitability and Financial Health

The screen’s emphasis on profitability and health is vital—firms weak in these areas often reduce dividends during tough times. Xylem’s ratings fit the strategy:

• Profitability (Rating: 6/10): Margins are stable, with a 10.74% net profit margin (top 26% of peers) and better trends in operational efficiency.
• Financial Health (Rating: 6/10): A low debt/equity ratio of 0.17 and solid liquidity (current ratio of 1.90) lower bankruptcy risk. The Altman-Z score of 4.51 further proves financial stability.

Valuation and Growth Factors

Xylem trades at a higher price (P/E of 30.74 vs. industry average of 25.91), reflecting its defensive sector and growth potential. Analysts forecast 10.56% annual EPS growth, which could lead to more dividend boosts. Still, investors should consider this against the higher valuation.

For a closer look, check Xylem’s full fundamental analysis report.

Finding More Options

Xylem is one of many stocks that meet the "Best Dividend" standards. To find other high-quality dividend payers, see the pre-configured screen here.

Disclaimer: This article is not investment advice. Always do your own research or talk to a financial advisor before making investment choices.