TOI:CC - This Dividend Stock Is a Safe Bet Regardless of Market Conditions
2023-08-13 09:45:00 ET
Investors may often forget that it’s the long-term investors that see the most returns. While it can be tempting to start moving with the wave during times of trouble or growth, it’s important to remain focused on growth.
That’s why today, we’re going to focus on a dividend stock that’s safe no matter how the market reacts. What’s even more surprising? It’s a dividend stock that’s in the tech sector .
Small dividend? Think again
When it comes to finding a smart dividend stock to invest in, the first question investors should ask themselves is, how safe is that dividend? In the case of Constellation Software ( TSX:CSU ), the answer is, quite safe.
Constellation Software stock may not be known for its dividend, and it’s clear why. It currently offers a yield at just 0.50%. However, that dividend pays out $5.31 per share, with shares currently trading at $2,704 as of writing.
The reason that dividend is safe is it already takes out a very low level of the company’s earnings. Those earnings instead go into mergers and acquisitions, and Constellation stock has proven that it is a powerhouse in this arena.
The company is well known for purchasing essential software companies and giving them the tools to thrive. From there, it collects revenue from these shiny new companies, and the process begins again. It’s been doing this for decades and hasn’t slowed down.
More growth on the way
Constellation Software stock announced this year the further spinout of Topicus ( TSXV:TOI ), providing an integrated press release on earnings during the first quarter. Topicus stock provides the same services as Constellation stock but in Europe. Therefore, the earnings were provided in euros.
Total revenue came in at an increase of 30% year over year — primarily again attributed to acquisitions. Net income also increased to €21.1 million, with free cash flow up to €101.1 million, an increase of 65%! The only decrease was in cash from operations, which fell by 1%.
The spinoff provides investors with the opportunity to get in on the birth of a new Constellation stock for a fraction of the price. However, it doesn’t come with a dividend. Instead, I’d stick with the mothership, which provides soaring revenue from both Topicus stock and Constellation stock, while also offering a dividend.
Passive income forever
When we finally look at passive income, investors should look at more than just dividends for safety. Constellation stock has demonstrated through its earnings and share growth that it can weather all market conditions. Shares are up 26% in the last year, yet analysts believe the stock will continue to have more room to grow.
In fact, analysts place the consensus price target estimate at about $3,000 as of writing! That’s certainly more passive income that could come your way beyond the dividend. Yet even so, just one share of Constellation stock will provide you with some extra cash in your pocket — no matter what the market holds in the near and distant future.
The post This Dividend Stock Is a Safe Bet Regardless of Market Conditions appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy .
2023