We assess Paychex Inc (NASDAQ:PAYX), [Trend Analysis] a dividend paying company in the services industry to determine if it is a healthy dividend paying stock that investors should consider as a solid income generating addition to their portfolios or not. Paychex Inc is currently priced at $47.71 after moving up 0.63% in the previous day of trading.
PAYX is currently paying an annualized dividend of $1.68 per share, translating to a dividend yield of approximately 3.49%. Generally we would consider a stock paying a dividend greater than 80% of its earnings to be risky.
This is due to the possibility that they will be unable to afford to pay the dividend in the future due to having no reserves and also not having cash reserves available for emergencies. Paychex Inc (NASDAQ:PAYX) currently has a dividend pay out ratio of 79.60%, therefore we consider PAYX’s dividend to be moderately risky, in this respect.
The next assessment we perform is by determining the quick ratio of PAYX. The quick ratio tells us if a company will be able to cover all of its current liabilities with liquid assets on hand. As a rule of thumb a number of 1.0 or better indicates this is likely, meaning the stock’s dividend is less risky. Paychex Inc currently has a quick ratio of 1.10, meaning it is in a relatively safe position.
Finally we look at the estimated earnings growth for Paychex Inc (NASDAQ:PAYX) over the coming 5 years. Generally if earnings are predicted to continue to grow, one can expect there to be continued earnings from which to pay dividends.
Paychex Inc has an estimated annual growth over the next 5 years of 9.60%. This means that it would appear PAYX should be able to maintain and grow their dividend.
Paychex Inc (NASDAQ:PAYX) made their last dividend payment on 2/16/2016 and went ex-dividend on 10/29/2015.