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What are we looking for?

Sustainable dividends from the pet and animal-care industry.

The screen

The animal-health industry has seen impressive growth in the past decade as more of household income gets channelled into the care of “companion animals.” The pandemic – and the associated rise in pet ownership as families stay close to home – has only accelerated the trend.

At the same time, rising global living standards continue to boost demand for protein-rich meat diets. That, in turn, has spurred the livestock business and expanded its health care needs.

Story continues below advertisement

From a list of animal-health stocks we identified leaders that pay dividends. We then applied our TSI Dividend Sustainability Rating System. It 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 sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

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. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated five stocks. PetMed Express Inc. is a leading online U.S.-wide pet pharmacy. Phibro Animal Health Corp. manufactures a range of mineral nutrition and other products for poultry, swine, beef and dairy cattle, and aquaculture. Patterson Cos. Inc. gets the majority of its sales from supplying veterinary clinics in the United States, Britain and Canada (and the rest from a separate dental supplies segment). New Jersey-based Zoetis Inc. is a leader in veterinary medicines, vaccines and diagnostic tools. (Its very low yield in part reflects the stock’s impressive 27-per-cent gain over the past six months.) Meanwhile, U.S. rural lifestyle retailer Tractor Supply Co. gets almost half of its revenue from livestock and pet products.

We advise investors to do additional research on any investments we identify here.

Select animal health  stocks

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Mil.)1Y Ttl. Rtn. (%)Recent Price (US$)
1Zoetis Inc.ZTS-NAbove Average90.577,197.426.8158.69
2Patterson Cos. Inc.PDCO-QAbove Average84.22,554.343.124.58
3Tractor Supply Co.TSCO-QAbove Average81.215,629.138.5132.56
4PetMed Express Inc.PETS-QAbove Average73.7608.017.530.28
5Phibro Amimal HealthPAHC-QAbove Average72.8726.1-25.917.17

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.

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

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