Is This 5.3% High-Dividend Yield Safe?
TIS Stock: A High-Dividend-Yield Stock Yielding 5.26%
Orchids Paper Products Company (NYSEMKT:TIS) stock would satisfy the need for investors seeking a stock with a high-dividend yield.
A manufacturer of paper towels, bath tissue and paper napkins, the concern with this high-dividend-yield stocks is always if the yield is safe. When making an investment, the goal is to earn a steady income over time, and failure due to an unsafe yield wastes both time and money.
For TIS stock, I have conducted my research, examining the financial statements and the company as a whole. Let me explain why the dividend yield on TIS stock would be considered safe.
TIS stock is currently trading at $26.60, which has a current dividend yield of 5.26%.
One indicator to determine if the dividend is safe is the company’s history, namely if it has cut or increased the dividend. In the case of TIS stock, the dividend has increased 75% since 2012. Increases indicate a positive for the safety of the dividend.
Further, the dividend increasing provides support to the stock price because investors bid the price higher. The price for Orchids Paper Products has been rising and trading towards the top end of its trading range.
The business model is important to the safety of the dividend, as it relates to how the dividend will be supported.
While its products may not be exciting, Orchids Paper stock is. This is in part thanks to continued cash flow from operations, which add to the safety of the dividend. Not only has it seen the four-year increase mentioned above, but sales numbers over the same period have grown by 68%.
Another positive to take away from the business operations is that Orchids Paper Products would be considered a consumer staples company. Consumer staples businesses continue to see sales being generated, no matter if the economy is growing or going through a downturn.
The price-to-earnings ratio for TIS stock is 19.28 times, which is about two-thirds the value of the industry average of 29.8 times.
Compared to the industry average, TIS stock once again looks attractive. This is determined by using the debt-to-capital ratio, which is 50% or higher when the company is using debt to grow the company; a ratio below 50% means it is using assets for growth. Orchids Paper Products’ debt-to-capital ratio is 49%, which is below the industry average of 53%.
Final Thoughts On TIS Stock
Ultimately, the dividend appears to be safe, based on the financial statements, assets and liabilities of Orchids Paper Products. The company’s actions have helped in this regard.
TIS stock is a great investment to consider to earn a steady income. It does beat out savings accounts and short-term investments which are offering near-zero-percent interest rates.
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