Over the past 10 years PetMed Express, Inc. (NASDAQ:PETS) has been paying dividends to shareholders. The company currently pays out a dividend yield of 5.0% to shareholders, making it a relatively attractive dividend stock. Does PetMed Express tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does PetMed Express fit our criteria?
The company currently pays out 51% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect PETS’s payout to remain around the same level at 55% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.0%. Furthermore, EPS is forecasted to fall to $1.92 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. PETS has increased its DPS from $0.40 to $1.08 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PETS a true dividend rockstar.
In terms of its peers, PetMed Express generates a yield of 5.0%, which is high for Online Retail stocks.
With this in mind, I definitely rank PetMed Express as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PETS’s future growth? Take a look at our free research report of analyst consensus for PETS’s outlook.
- Valuation: What is PETS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PETS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.