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Paychex (PAYX) is a Top Dividend Stock Right Now: Should You Buy?
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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Paychex in Focus
Paychex (PAYX - Free Report) is headquartered in Rochester, and is in the Business Services sector. The stock has seen a price change of -0.21% since the start of the year. Currently paying a dividend of $0.56 per share, the company has a dividend yield of 3.3%. In comparison, the Outsourcing industry's yield is 1%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.24 is up 8.7% from last year. Over the last 5 years, Paychex has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.80%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Paychex's current payout ratio is 90%, meaning it paid out 90% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PAYX for this fiscal year. The Zacks Consensus Estimate for 2018 is $2.85 per share, representing a year-over-year earnings growth rate of 11.76%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that PAYX is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Paychex (PAYX) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Paychex in Focus
Paychex (PAYX - Free Report) is headquartered in Rochester, and is in the Business Services sector. The stock has seen a price change of -0.21% since the start of the year. Currently paying a dividend of $0.56 per share, the company has a dividend yield of 3.3%. In comparison, the Outsourcing industry's yield is 1%, while the S&P 500's yield is 1.93%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.24 is up 8.7% from last year. Over the last 5 years, Paychex has increased its dividend 5 times on a year-over-year basis for an average annual increase of 9.80%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Paychex's current payout ratio is 90%, meaning it paid out 90% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for PAYX for this fiscal year. The Zacks Consensus Estimate for 2018 is $2.85 per share, representing a year-over-year earnings growth rate of 11.76%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that PAYX is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).