My Favorite June Dividend Stock | news

As June begins, certain macroeconomic trends come into focus. Supply tightening continues, inflation raises its ugly head, the economic recovery changes spending patterns, and the uncertainty about the pandemic is not over yet.

Ebay (WKN: 916529, 5.06%) is a company that I think can do well in this economic environment. The low-asset business model can protect against rising costs, and eBay is the best place for consumers when things are sold out everywhere else.

More importantly, eBay has done a fantastic job of increasing its profits over the last decade to finance its dividend payment sustainably. Let’s take a closer look at why eBay is my favorite dividend stock for the month of June.

eBay has been increasing its profits at a rapid pace

From 2012 to 2021, eBay’s earnings per share grew. share by 23.6% annually. Earnings are crucial to a company’s ability to pay dividends. Of course, a company could finance its dividends from savings or loans, but these sources would eventually be depleted. The only sustainable source of dividend financing is profits. In that regard, income-seeking investors may be reassured by eBay’s solid earnings growth.

For the most recent quarter, which ended March 31, eBay’s revenue fell 6% year over year. The company loses customers and commitment as the economy picks up again and consumers increasingly shift the cost of physical stores. eBay does not own the inventory sold on its platform and lets sellers handle shipping. The cheap business model should protect eBay from rising costs that plague other businesses.

If there are delivery bottlenecks, consumers can search the eBay platform for items that are sold out elsewhere. eBay offers both auctions and fixed price offers. Sometimes people who pick up items sold out in stores offer them for a premium on eBay or put them up for auction at higher prices. With eBay accounting for a certain percentage of transactions as revenue, the increase in efforts is good news.

EBAY PAYOUT PRICE, DATA OF YCHARTS

Note that eBay has only paid a dividend of $ 0.56 per share since 2019, but has already increased it twice to $ 0.64 in 2020 and $ 0.72 in 2021. Also eBay’s payout ratio (dividend per share divided by earnings per share . share) was recently only 4.1%, indicating that eBay has plenty of room for more dividend increases.

Commitment and a low investment company

Income investors can also be encouraged by eBay management’s continued focus on one business model. This means that the company does not have to reuse the profits back to the company. Instead, it can return profits to shareholders via dividends.

From 2011 to 2021, eBay’s total assets fell from $ 27.3 billion to $ 26.6 billion. That means eBay has returned the billions it earned in profits to shareholders. Of course, depreciation can also explain the decline, but it shows that management is not investing in fixed assets as fulfillment facilities.

EBAY P / E, DATA OF YCHARTS

Fortunately for investors, eBay is not expensive, with a price-to-free-cash-flow multiple of 16.6 and a price-to-earnings multiple of 2.7. The cheap valuation, solid earnings growth and asset-friendly business model make eBay my favorite stock in June.

My favorite dividend stock for the June article first appeared on The Motley Fool Germany.

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This article was written by Parkev Tatevosian and was published on Fool.com on 29/05/2022. It has been translated so that our German readers can participate in the discussion. Parkev Tatevosian

Parkev Tatevosian has positions on eBay. The Motley Fool recommends eBay and recommends the following options: short July 2022 $ 57.50 calls on eBay.

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