Dividend investing requires a methodical approach to avoid the common pitfalls of chasing high yields without context. The strategy here relies on the ChartMill Dividend Rating, which evaluates stocks on a scale of 1 to 10 by analyzing yield sustainability, payout ratios, growth history, and overall financial health. But a high dividend score alone isn't enough—we also require a minimum Profitability Rating of 5 and a Health Rating of 5 to ensure the company can support its payouts through solid earnings and a strong balance sheet. The idea is to find stocks that offer reliable dividends without exposing investors to undue risk from weak fundamentals.
Accenture (ACN) emerges as an attractive candidate from this screen. With a Dividend Rating of 7, it qualifies as a top-tier dividend stock, but it’s the supporting scores that make it stand out. The company earns a Profitability Rating of 8 and a Health Rating of 8, indicating it’s not just a dividend payer but a well-run business with strong margins and low financial risk.
Dividend Profile: Yield, Growth, and Sustainability
The most eye-catching figure is Accenture’s dividend yield of 5.09%, which is significantly higher than both the IT Services industry average of 1.50% and the S&P 500 average of 1.82%. Importantly, this yield isn’t simply a result of a falling stock price—while the share price has dropped 36% in the last three months, the company’s fundamentals remain strong. The dividend growth rate of 13.12% annually over the past five years is impressive, and Accenture has maintained uninterrupted payouts for at least a decade without cutting them in the last five years.
However, dividend sustainability deserves scrutiny. The payout ratio stands at 50.51%, which is manageable but on the higher side. A note of caution: earnings are growing slower than dividends, which could eventually pressure future increases. This is a subtle risk typical of mature companies like Accenture, but it shouldn’t overshadow the current strong cash flow coverage.
Profitability and Health: Why They Matter
For dividend investors, profitability ensures that the company has the earnings to continue paying dividends. Accenture’s Return on Equity (ROE) is 24.51%, and its Return on Invested Capital (ROIC) is 18.76%, both ranking among the top 20% of industry peers. Profit margins are equally solid: a 10.61% net profit margin and a 15.70% operating margin reflect efficient operations.
Financial health is another pillar. With an Altman-Z score of 3.59, Accenture faces little bankruptcy risk. Its debt-to-equity ratio is just 0.16, meaning it relies minimally on borrowing. The debt-to-free-cash-flow ratio of 0.41 indicates that the company could theoretically repay all its debt in less than half a year using its free cash flow. While the current and quick ratios are slightly below industry medians (1.34 each), the strong solvency and profitability more than compensate.
Valuation and Growth: The Full Picture
Valuation often gets overlooked in dividend analysis, but a reasonable price can enhance total returns. Accenture trades at a P/E ratio of 9.34, well below the industry average of 30.17 and the S&P 500’s 26.63. The forward P/E of 8.49 suggests analysts expect continued earnings growth. When factoring in growth, the PEG ratio (which adjusts P/E for expected earnings growth) is neutral, indicating the stock isn’t overvalued for its future prospects.
Growth has been steady but slowing. EPS rose 7.96% over the last year and 11.21% annually over the past five years, though future projections suggest a deceleration to around 8.13% per year. Revenue growth follows a similar pattern. This moderation is worth monitoring but doesn’t negate the current value proposition.
Analyst Views and Broader Context
The broader market environment is supportive: the S&P 500’s long-term trend remains positive, and the short-term trend is also positive. This backdrop favors established companies like Accenture, which benefit from stable demand for its consulting and IT services across three major geographic markets—Americas, EMEA, and Asia Pacific.
For a deeper look into the numbers behind this analysis, the full fundamental report offers a detailed breakdown of ratings, trends, and ratios.
Call to Action
This is just one stock that passed the screen. If you’re looking for more opportunities that combine high dividend ratings with strong profitability and health, the Best Dividend Stocks screen can be run directly with the same filters used here. You can also adjust parameters like market cap or exchange to narrow the list to your preferred universe.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research and consult with a licensed financial advisor before making investment decisions.
Read full article here »
View the Zacks #1 Rank List
Accenture PLC-CL A (NYSE:ACN): A Top Dividend Stock with Strong Fundamentals and a 5.09% Yield
Dividend investing requires a methodical approach to avoid the common pitfalls of chasing high yields without context. The strategy here relies on the ChartMill Dividend Rating, which evaluates stocks on a scale of 1 to 10 by analyzing yield sustainability, payout ratios, growth history, and overall financial health. But a high dividend score alone isn't enough—we also require a minimum Profitability Rating of 5 and a Health Rating of 5 to ensure the company can support its payouts through solid earnings and a strong balance sheet. The idea is to find stocks that offer reliable dividends without exposing investors to undue risk from weak fundamentals.
Accenture (ACN) emerges as an attractive candidate from this screen. With a Dividend Rating of 7, it qualifies as a top-tier dividend stock, but it’s the supporting scores that make it stand out. The company earns a Profitability Rating of 8 and a Health Rating of 8, indicating it’s not just a dividend payer but a well-run business with strong margins and low financial risk.
Dividend Profile: Yield, Growth, and Sustainability
The most eye-catching figure is Accenture’s dividend yield of 5.09%, which is significantly higher than both the IT Services industry average of 1.50% and the S&P 500 average of 1.82%. Importantly, this yield isn’t simply a result of a falling stock price—while the share price has dropped 36% in the last three months, the company’s fundamentals remain strong. The dividend growth rate of 13.12% annually over the past five years is impressive, and Accenture has maintained uninterrupted payouts for at least a decade without cutting them in the last five years.
However, dividend sustainability deserves scrutiny. The payout ratio stands at 50.51%, which is manageable but on the higher side. A note of caution: earnings are growing slower than dividends, which could eventually pressure future increases. This is a subtle risk typical of mature companies like Accenture, but it shouldn’t overshadow the current strong cash flow coverage.
Profitability and Health: Why They Matter
For dividend investors, profitability ensures that the company has the earnings to continue paying dividends. Accenture’s Return on Equity (ROE) is 24.51%, and its Return on Invested Capital (ROIC) is 18.76%, both ranking among the top 20% of industry peers. Profit margins are equally solid: a 10.61% net profit margin and a 15.70% operating margin reflect efficient operations.
Financial health is another pillar. With an Altman-Z score of 3.59, Accenture faces little bankruptcy risk. Its debt-to-equity ratio is just 0.16, meaning it relies minimally on borrowing. The debt-to-free-cash-flow ratio of 0.41 indicates that the company could theoretically repay all its debt in less than half a year using its free cash flow. While the current and quick ratios are slightly below industry medians (1.34 each), the strong solvency and profitability more than compensate.
Valuation and Growth: The Full Picture
Valuation often gets overlooked in dividend analysis, but a reasonable price can enhance total returns. Accenture trades at a P/E ratio of 9.34, well below the industry average of 30.17 and the S&P 500’s 26.63. The forward P/E of 8.49 suggests analysts expect continued earnings growth. When factoring in growth, the PEG ratio (which adjusts P/E for expected earnings growth) is neutral, indicating the stock isn’t overvalued for its future prospects.
Growth has been steady but slowing. EPS rose 7.96% over the last year and 11.21% annually over the past five years, though future projections suggest a deceleration to around 8.13% per year. Revenue growth follows a similar pattern. This moderation is worth monitoring but doesn’t negate the current value proposition.
Analyst Views and Broader Context
The broader market environment is supportive: the S&P 500’s long-term trend remains positive, and the short-term trend is also positive. This backdrop favors established companies like Accenture, which benefit from stable demand for its consulting and IT services across three major geographic markets—Americas, EMEA, and Asia Pacific.
For a deeper look into the numbers behind this analysis, the full fundamental report offers a detailed breakdown of ratings, trends, and ratios.
Call to Action
This is just one stock that passed the screen. If you’re looking for more opportunities that combine high dividend ratings with strong profitability and health, the Best Dividend Stocks screen can be run directly with the same filters used here. You can also adjust parameters like market cap or exchange to narrow the list to your preferred universe.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research and consult with a licensed financial advisor before making investment decisions.
Read full article here »