1 great dividend for recurring passive income

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1 great dividend for recurring passive income

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Some dividends are sustainable and can be a great source of steady income for stock investors.


One example is Johnson Matthey (LSE: JMAT), a sustainable technologies and chemicals company with a focus on platinum.

The company has paid dividends to shareholders continuously since at least 1999. Over the last 25 years, the total ordinary annual payment to shareholders has increased from 19 pence per share to 77 pence per share.

Insightful valuation

But can such progress last? One uncertainty is that the company makes most of its money from automotive catalytic converters.

These devices apply chemical reactions to reduce the amount of unsafe gases emitted from exhaust. However, the shift to electric vehicles means that the company’s core business will likely decline.

Stock prices have been reacting to these concerns for some time now.

This chart looks bleak. But the shares’ downward trajectory has made the valuation attractive, and City analysts are bullish on future earnings.

The current 12-month fiscal period to March 2025 and the year after that is likely to see solid double-digit percentage growth in profits.

One of the company’s strengths is that it has been around for decades and has mighty R&D operations. The company’s collective knowledge and technologies are relevant to current applications. As such, the company has the potential to play a huge role in a profitable, greener future.

In May’s annual report, CEO Liam Condon was upbeat. The company’s pristine air and platinum group metals (PGM) services are generating cash and providing “strong” a platform on which novel operations can be built.

Moving to novel markets

The company develops and expands its catalyst and hydrogen technologies to support and profit from energy transition trends and achieve a net-zero future.

Meanwhile, Condon said the slowdown in battery electric vehicle penetration means the company’s pristine air business is likely to remain “stronger for longer.”

City analysts expect the dividend to remain broadly flat this year and next. They do not expect the company’s cash flow to fall much.

What is needed here is an tidy shift of revenue, profit and cash flow from catalysts to upcoming markets and emerging technologies for the future. And the company seems quietly confident that it can keep up with the times without compromising its overall business.

This change will likely unfold over years, not just months. But there is no guarantee that the company will maintain its cash flow and shareholder dividends throughout the process.

Positive results are not certain, and the stock’s weakness may turn out to be justified. This is probably the biggest risk for shareholders.

Still, with the share price at around 1,640p, the projected price-to-earnings ratio for next year is just under seven and the expected dividend yield is just over 4.7%.

To me, this looks like a affordable valuation and could aid mitigate some of the risks if the company maintains its dividend payments in the coming years. I would do more research now and think about buying some shares to hold on to for the long term.


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