Pitney Bowes (PBI) stock sank on news the postal meter maker would halve its long-cherished dividend, and the move ought to send yield junkies, who’ve been loading up on dividend-paying stocks, in search of data to make sure they’re not holding the next dividend slasher.
Fat dividend yield is attractive, but as YCharts has repeatedly written, the smarter move is to look for dividend growth, and to gauge the financial underpinnings of a stock’s ability to continue that payout growth.
The YCharts Stock Screener is a good place to start. You can load in the stocks you want to assess. This screener looks at payout ratio and also cash dividend payout ratio.
The screener shows Pitney Bowes has been paying out well over half of profits and cash to fund its dividend. In the stock chart below, we see that Pitney Bowes was clinging to its membership in the S&P 500 Dividend Aristocrats, companies that have raised their payouts at least annually for the past 25 years, by minimally raising its dividend each year, but the dividend yield soared as a deteriorating business hurt the stock price.
In an earlier series, YCharts loaded the S&P 500 Dividend Aristocrats into a stock screener. YCharts contributing editor Carla Fried then went looking – not for the fattest current yield, but for the best dividend growth stories.
Fried’s search turned up the ten best dividend growth stories on the Aristocrats list: Lowe's (LOW), Walgreen (WAG), McDonald’s (MCD), Target (TGT), W.W. Grainger (GWW), Aflac (AFL), Medtronic (MDT), Wal-Mart (WMT), T. Rowe Price (TROW) and Clorox (CLX).
YCharts has also published a white paper, offering more detail, and explicit how-to lessons, on dividend growth.
The rush into dividend-paying stocks has pushed up valuations and, too often, occurred without sufficient analysis of the dividend paying strength of the company.
Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at firstname.lastname@example.org.
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