New Buy PetMed Express (PETS)

01 Jul 2016 21:17

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Back in 2011 PetMed Express (PETS) was a stock that continually appeared when I was searching for dividend growth stocks. Back then I dismissed PETS because I did not believe that their business model would last. I was sure that pet owners were loyal to their local pet store and would pick up their pet's prescriptions there and big chains like PETCO would bury them.

Fast forward 5 years later and they have proven me wrong. Consumers have become extremely comfortable with online purchases and big chains like PETCO failed to capitalize. Between PETS established online presence and the incredible loyalty between owners and their pets (which many consider as family members) It is hard to ignore and so I acquired 150 shares at $18.50.

PETS has a current yield just above 4% and a 5 year average growth rate of 8.59% and no long term debt. The one weak spot is that their dividend payout ratio is slightly higher than what I normally find acceptable as it is currently at 74%.

Despite the high payout ratio I like the stock as a staple company (I know it is not in the consumer staple sector). As I stated earlier, pets are family members and like any family member you would go to any lengths to keep that family member healthy.

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