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What are we looking for?

Sustainable dividends from new stock issues that have transcended the usual IPO hoopla.

The screen

Shares of social media platform Reddit Inc. went on a wild ride after last week’s initial public offering – more than doubling before falling to a still-impressive gain of about 45 per cent. But, if past new issues are anything to go by, sustaining momentum will be a challenge. It also poses a big risk for investors. IPOs, in general, come to market when it’s a good time for the company or insiders to sell. That’s not necessarily a good time for you to buy. In fact, it’s often a bad time. Consider the sharp drop in recent IPO share prices, often after a short-lived spike. Still, good companies with good prospects do go public every year. And one way to cut IPO risk – and distinguish the good from the bad – is to wait till a market slump or economic slowdown comes along. In the aftermath, take a fresh look at how that recent stock issue performed. All in all, if the IPO’s business model has held up well (even if its stock price has dropped along with the market), the company may have a brighter-than-average future ahead. We started this search with an extensive list of recent dividend-paying IPOs before singling out those with still-strong prospects. That’s despite pandemic tumult and the current bout of inflation. To each company, we then applied our Dividend Sustainability Rating system, which awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments; two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company is an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Dividend payers that recently had an IPO

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%) Recent Price (US$)
1VICI Properties Inc.VICI-NAbove Average85.630.4-5.929.75
2Warner Music Group Corp.WMG-QAbove Average82.017.04.533.32
3ADT Inc.ADT-NAbove Average73.36.0-4.96.73
4Levi Strauss & Co. LEVI-NAbove Average72.57.516.619.37
5Dun & Bradstreet Holdings Inc.DNB-NAbove Average72.04.3-12.99.96
6Krispy Kreme Inc.DNUT-QAbove Average70.92.90.415.35

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.

Our TSI Dividend Sustainability Rating System generated six stocks. Warner Music Group Corp. WMG-Q, headquartered in New York, is one of the world’s leading music entertainment companies with numerous prominent record labels and artists. Warner launched its IPO in June, 2020. New Jersey-based Dun & Bradstreet Holdings Inc. DNB-N offers its clients access to comprehensive information and data on millions of global businesses. The company’s initial public offering began trading in July, 2020. Krispy Kreme Inc. DNUT-Q, based in Charlotte, N.C., is an international doughnut maker. The company launched its IPO in July, 2021, and the stock recently jumped on the news McDonald’s will bring the chain’s treats to its U.S. restaurants. San Francisco’s Levi Strauss & Co. LEVI-N makes and sells denim jeans and related clothing. Levi’s went public in March, 2019. ADT Inc. ADT-N, based in Florida, is a leading provider of monitored security products and services to residential customers in the United States. The firm launched its IPO in January, 2018. And finally, New York-headquartered Vici Properties Inc. VICI-N owns a major real estate portfolio of gambling, hospitality and entertainment destinations. Those include Caesars Palace Las Vegas, MGM Grand and the Venetian Resort Las Vegas. Vici went public in February, 2018.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 16/04/24 4:00pm EDT.

SymbolName% changeLast
WMG-Q
Warner Music Group Corp Cl A
+0.6%33.66
DNB-N
Dun & Bradstreet Holdings Inc
-2.13%9.19
DNUT-Q
Krispy Kreme Inc
-1.75%14.06
LEVI-N
Levi Strauss & Company Cl A
+3.5%20.41
ADT-N
ADT Inc
-1.12%6.16
VICI-N
Vici Properties Inc
-1.56%27.15

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