Top S&P 500 Companies with No Debt: It’s always nice to find a company that’s carrying little-to-no debt, but to find one that’s performing well on most other fronts might just be the golden ticket to profitability. And in these volatile times, that added peace-of-mind that a good balance sheet brings is all the more valuable.
In this post, we’ll take a look at 7 of the best debt-free companies that the S&P 500 has to offer.
T. Rowe Price Group, Inc. (TROW)
Founded way back in 1937, T. Rowe Price Group, Inc. is one of the most famous and highly-regarded global investment firms in the world.
The fund has almost $1.7 trillion in assets under management (AUM), with two-thirds of its AUM coming from cash derived through its lucrative and sticky retirement plan accounts.
The company also generates a large portion of its revenues from advisory fees, and, naturally, the more assets the business under management, the more fees it can ultimately book.
TROW is known for its exceptionally reliable dividend scheme, and has been raising its payout now for almost 35 years.
At the last time of asking, T. Rowe Price increased its dividend by 20% to $4.32 annually, offering a dividend yield of 2.92%.
Over the last decade the company’s dividend has grown an average of 14% per year, and its management saw fit to throw in a surprise special dividend of $3 in 2021 as well. TROW’s dividend is easily covered with a low payout ratio of 32%, leaving plenty of room for further increases in the future.
A declining share price throughout 2021 has led to TROW’s valuation metrics suggesting the stock is surprisingly cheap right now. Its forward price-to-sales multiple of just 4-times is about standard for the financials sector, while its revenue growth of 9% beats the competition’s 6% by a good margin.
Monster Beverage Corporation (MNST)
The energy drinks market has seen massive growth these last two decades, and Monster has been there from the very beginning.
The beverage manufacturer shared pretty much joint first place with Red Bull as the largest energy drink brand in the US in 2021, and, for a company operating in the notoriously low margin consumer staples sector, MNST’s year-on-year revenue growth of 20% – and its EBITDA margin of 35% – is something to behold.
A large part of Monster’s successful expansion effort has been bolstered by the company having almost no debt to its name. Because of this, the business has always had the liquidity to acquire new brands when the opportunity’s arisen, never needing to enter into complicated credit arrangements to launch crucial marketing campaigns in new geographical territories.
Indeed, MNST’s nimble, debt-free set-up is aiding the company in its latest efforts to break into the alcoholic drinks market too.
The firm recently announced its buyout of CANarchy Craft Brewery Collective, which management believes will provide a “springboard [into] the alcoholic beverage sector.” The deal delivers Monster a fully-realized distribution and licence infrastructure, as well as the personnel and expertise to flourish in the industry.
Intuitive Surgical, Inc. (ISRG)
Intuitive Surgical is a leader in the minimally invasive surgical procedures space. The firm’s primary product is its da Vinci Surgical Systems platform, for which it designs, develops and manufactures robotic accessories and other instrumentation for use within the operating room and elsewhere.
It’s obvious that the business is highly profitable – the company enjoys gross margins of nearly 70%, and its cash position grew from $6.9 billion to $8.6 billion over the course of fiscal 2021.
In addition, the robotic-assisted surgery industry is also expanding at a lightning rate, as around 15% of all surgeries performed today involve the use of some kind of minimally invasive technology.
ISRG suffered a temporary set-back during the pandemic as elective surgical procedures were suspended all across the world. The company saw a drop in its sales volumes, as well as a fall in its total revenues.
However, as the global economy begins to recover, Intuitive Surgical’s fortunes are also on the up. Fourth quarter top-line income grew by 17%, and, after its recent share price pull-back, the company’s valuation is close to its lowest in over three years, with a forward PE ratio of just 53-times.
Source: Unsplash
Amdocs Limited (DOX)
Another debt-free business offering an excellent dividend return is Amdocs Limited, a customer relationship management (CRM) company specializing in software and services solutions for the communications industry.
Like many great dividend stocks, Amdocs is a cash flow monster, generating a very healthy $147 million during the first quarter of 2022 – and, while its record revenue of $1.1 billion for the period was up only 1.7% year-on-year, it was still in-line with Wall Street’s expectations.
Importantly, however, the company reported an earnings beat of $0.02 with an EPS of $1.20, which came in at the higher end of its previously stated guidance range.
In addition to DOX having increased its dividend payout by 10% for the second year in succession, the company also rewarded shareholders with its ambitious share buyback scheme.
For example, the firm repurchased $171 million worth of stock throughout Q1 – an increase of $31 million from the quarter before – having spent $680 million on buybacks for the full-year 2021.
Fifth Third Bancorp (FITB)
It’s been a good twelve months for Fifth Third Bancorp, whose share price appreciation has seen the banking stock rise 47% since the same time last year.
The Cincinnati, Ohio-based financial services company has a pretty reliable revenue profile, making it a safe bet for conservative and risk-averse investors. The firm’s dividend is also a big draw for shareholders, with its current quarterly payout having more than doubled since 2017.
Furthermore, the bank has delivered strong financial results of late, with its record commercial loan production up almost 50% sequentially, while its capital plan has seen the business repurchase $316 million of shares during the fourth quarter 2021 as well.
Non-interest income is also up 4% from the previous quarter, with its commercial banking revenue and its service charge on deposits helping to drive growth in the segment too.
SEI Investments Company (SEIC)
Fintech company SEI Investments has crafted itself a distinct position in what is a rapidly-changing financial services industry landscape.
The business has about $1.3 trillion of assets under management, and employs roughly 4,300 members of staff across the globe. The firm brings together technological solutions with financial goals to ensure its clients needs are fulfilled through its enterprise platform solutions.
Having established a reputation as an efficient back office processing outfit, SEI has gotten to the point now where 90% of its revenues are generated on a recurring basis, lending itself a high degree of stability and predictability in its earning capabilities.
The company also has strong cash flows from operations, which saw it bring in $489 million in 2020, as well as a proven track record of profitability and growth. And while SEIC’s better-than-expected results for the fourth quarter came mainly off the back of continued sales momentum, it was also due in part because the company continued to execute its own growth strategy in what were positive capital markets.
Paychex, Inc. (PAYX)
Paychex is a human capital management (HCM) company offering payroll and benefits outsourcing solutions to a wide-range of small- to medium-sized businesses. The firm has more than 710,000 clients, and is a leader in the human resources outsourcing sector with a market capitalization for the enterprise of $43 billion.
Trends that began during the pandemic have persisted throughout the year, with businesses keen to consult PAYX for its human resources advice, both in a bid to ensure they retain the best talent in what is an increasingly fluid and uncertain jobs market, and also to help navigate the paid leave tax credits legislation emanating out of the health crisis.
Due to this demand for its services, Paychex recently reported revenue growth of 13% year-on-year for the second quarter at $1.09 billion, with an earnings beat of $0.11 on its EPS of $0.91.
Chairman and Chief Executive Officer of Paychex, Martin Mucci, reckons that the complicated environment for businesses will help the company leverage its HCM technology to better serve its clients in maximizing their efficiency.
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