When screening for dividend-paying stocks, it’s crucial to look beyond just the yield. A high dividend can be a trap if the company’s financial health is shaky or its profitability is declining. The strategy behind the "Best Dividend Stocks" screen is to isolate companies that offer a strong, sustainable dividend while also maintaining a decent level of financial health and profitability. The screen uses ChartMill’s ratings to filter for stocks with a Dividend Rating of 7 or higher, a Health Rating of at least 5, and a Profitability Rating of at least 5. This ensures we are looking at companies that not only pay a good dividend but also have the financial stability to keep doing so.
La-Z-Boy Inc (NYSE:LZB) emerges from this screen as a candidate worth a closer look. The company, known for its residential furniture brands, earns a fundamental rating of 5 out of 10 overall, but its specific scores tell a more nuanced story. For dividend investors, the headline number is the Dividend Rating of 7 out of 10, which qualifies it for the screen. However, the supporting ratings in health and profitability provide the context needed to evaluate its true potential.
Dividend Strength
The dividend profile of La-Z-Boy is where the stock really shines. According to the fundamental report, the company offers a yearly dividend yield of 2.43% . This is above the S&P 500 average of 1.74% and significantly higher than the industry average of 1.46%, placing LZB in the top 16% of its peers for yield.
More important than the current yield is the track record. The dividend has grown at an average annual rate of 20.84% over the past five years. This kind of growth is rare and signals a commitment to returning capital to shareholders. Furthermore, the payout ratio stands at a very sustainable 37.21% , meaning the company is using less than half of its net income to fund the dividend, leaving a comfortable buffer. The only note of caution on the dividend front is that earnings are growing slower than the dividend payout, which suggests the recent high growth rate may not be sustainable indefinitely.
Profitability and Health
The screen requires a minimum Health Rating of 5, and La-Z-Boy scores a 6 out of 10 here. A key strength is the company’s balance sheet: it carries no debt, making its Debt/Equity and Debt/FCF ratios zero. This is a massive advantage for a dividend payer, as it means there are no large interest payments to worry about, and the cash flow is fully available for dividends or reinvestment. The Altman-Z score of 2.88 indicates a limited risk of bankruptcy, which adds a layer of security for long-term holders.
On the profitability side, the score is a 5 out of 10, meeting the screen's minimum threshold. The company has been profitable for each of the past five years and maintains a healthy Gross Margin of 44.04% , which is among the best in its industry. Its Operating Margin of 7.01% also outperforms over 60% of its peers. While recent profit margins have seen some decline, the underlying profitability metrics remain acceptable for a dividend-focused strategy, especially when paired with the company's strong liquidity and zero-debt position.
Valuation and Growth
For dividend investors, valuation is important because buying at an expensive price can erode the effective yield. Here, LZB looks reasonably priced. The Price/Earnings (P/E) ratio is 12.92, which is well below the industry average of 25.27 and the S&P 500's 27.12. The Price/Forward Earnings ratio of 13.18 also suggests the stock is not overvalued relative to its expected earnings.
Growth is modest but not absent. Earnings per share have grown by an average of 3.16% per year over the last five years, and analysts expect that to accelerate to 6.88% per year going forward. This combination of modest growth and a low valuation provides a solid foundation for a dividend investment.
Summary for the Dividend Investor
La-Z-Boy fits the profile of a stock that was selected for its strong dividend rating while still passing basic quality checks. It offers a yield well above the market average, a stunning history of dividend growth, and a payout ratio that suggests the dividend is safe. The balance sheet, with zero debt, is a major positive, and the valuation is cheap relative to the broader market. While profitability and growth are not exceptional, they are sufficient to support the dividend thesis.
This is just one example. The full screen uses these same criteria to uncover a broader list of opportunities. You can run the Best Dividend Stocks screen yourself to find more stocks with a high dividend rating and sufficient health and profitability.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own due diligence before making investment decisions.
Read full article here »
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La-Z-Boy Inc (NYSE:LZB) Dividend Strength Shines with Zero-Debt Balance Sheet
When screening for dividend-paying stocks, it’s crucial to look beyond just the yield. A high dividend can be a trap if the company’s financial health is shaky or its profitability is declining. The strategy behind the "Best Dividend Stocks" screen is to isolate companies that offer a strong, sustainable dividend while also maintaining a decent level of financial health and profitability. The screen uses ChartMill’s ratings to filter for stocks with a Dividend Rating of 7 or higher, a Health Rating of at least 5, and a Profitability Rating of at least 5. This ensures we are looking at companies that not only pay a good dividend but also have the financial stability to keep doing so.
La-Z-Boy Inc (NYSE:LZB) emerges from this screen as a candidate worth a closer look. The company, known for its residential furniture brands, earns a fundamental rating of 5 out of 10 overall, but its specific scores tell a more nuanced story. For dividend investors, the headline number is the Dividend Rating of 7 out of 10, which qualifies it for the screen. However, the supporting ratings in health and profitability provide the context needed to evaluate its true potential.
Dividend Strength
The dividend profile of La-Z-Boy is where the stock really shines. According to the fundamental report, the company offers a yearly dividend yield of 2.43% . This is above the S&P 500 average of 1.74% and significantly higher than the industry average of 1.46%, placing LZB in the top 16% of its peers for yield.
More important than the current yield is the track record. The dividend has grown at an average annual rate of 20.84% over the past five years. This kind of growth is rare and signals a commitment to returning capital to shareholders. Furthermore, the payout ratio stands at a very sustainable 37.21% , meaning the company is using less than half of its net income to fund the dividend, leaving a comfortable buffer. The only note of caution on the dividend front is that earnings are growing slower than the dividend payout, which suggests the recent high growth rate may not be sustainable indefinitely.
Profitability and Health
The screen requires a minimum Health Rating of 5, and La-Z-Boy scores a 6 out of 10 here. A key strength is the company’s balance sheet: it carries no debt, making its Debt/Equity and Debt/FCF ratios zero. This is a massive advantage for a dividend payer, as it means there are no large interest payments to worry about, and the cash flow is fully available for dividends or reinvestment. The Altman-Z score of 2.88 indicates a limited risk of bankruptcy, which adds a layer of security for long-term holders.
On the profitability side, the score is a 5 out of 10, meeting the screen's minimum threshold. The company has been profitable for each of the past five years and maintains a healthy Gross Margin of 44.04% , which is among the best in its industry. Its Operating Margin of 7.01% also outperforms over 60% of its peers. While recent profit margins have seen some decline, the underlying profitability metrics remain acceptable for a dividend-focused strategy, especially when paired with the company's strong liquidity and zero-debt position.
Valuation and Growth
For dividend investors, valuation is important because buying at an expensive price can erode the effective yield. Here, LZB looks reasonably priced. The Price/Earnings (P/E) ratio is 12.92, which is well below the industry average of 25.27 and the S&P 500's 27.12. The Price/Forward Earnings ratio of 13.18 also suggests the stock is not overvalued relative to its expected earnings.
Growth is modest but not absent. Earnings per share have grown by an average of 3.16% per year over the last five years, and analysts expect that to accelerate to 6.88% per year going forward. This combination of modest growth and a low valuation provides a solid foundation for a dividend investment.
Summary for the Dividend Investor
La-Z-Boy fits the profile of a stock that was selected for its strong dividend rating while still passing basic quality checks. It offers a yield well above the market average, a stunning history of dividend growth, and a payout ratio that suggests the dividend is safe. The balance sheet, with zero debt, is a major positive, and the valuation is cheap relative to the broader market. While profitability and growth are not exceptional, they are sufficient to support the dividend thesis.
This is just one example. The full screen uses these same criteria to uncover a broader list of opportunities. You can run the Best Dividend Stocks screen yourself to find more stocks with a high dividend rating and sufficient health and profitability.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own due diligence before making investment decisions.
Read full article here »