10 Companies With No Debt (DOX,NHTC,PAYX)

Going long in this volatile market can be stressful. You might be able to reduce that stress if you invest in companies with no debt, particularly if they are performing well in other areas. 

Direct Competition Impact

After keeping interest rates at record lows for years, the Federal Reserve raised rates several times from 2018 until the COVID19 pandemic hit in Spring of 2020, when the Fed once again lowered rates close to zero. Economists consider rising rates to be a sign that the economy is doing well because unemployment is low, economic growth is strong, and inflation is relatively stable. This interest rate helps determine rates for mortgages, credit cards, and other consumer borrowings.

Many companies are undergoing a deleveraging process for many companies, which is bad news. However, for companies with no debt is good news. For example, take three companies in the same industry, Company A, Company B, and Company C. Company A and Company B took advantage of low record-low interest rates to fuel top-line growth and/or to buy back stock to boost the company’s share price. The eventuality is that these companies must allocate more capital to pay off debts or risk insolvency. Paying off debt is obviously the lesser of two evils.

If Company A and Company B are allocating more capital to debt repayment, then they are allocating less capital to capital expenditure, or CapEx. This, in turn, will make them less competitive and increase market share for Company C, which has no debt to deleverage. Company C might not reap the rewards immediately because deflation tends to bring almost everything down with it, but it will weather the storm better than its peers and come out stronger on the other side. Keep this in mind when you look at the stocks below. There are no guarantees that these companies will experience market share gains, but they have a better shot at gaining share than some of their peers.

No Debt Concerns

A stellar balance sheet is indeed positive, but it is unwise to consider just one metric. The following metrics as of the January 2022 have been included in the chart below: cash position, one-year stock performance, operating cash flow (over the past year), dividend yield, revenue, and net income. A strong cash position combined with no debt adds value, which is why a company will look more appealing to potential acquirers.

For one-year performance, seeing a gain in a volatile market is positive, but when it comes to investing in no-debt companies, it is more of an investment than a trade. For operating cash flow, seeing strong cash flow generation is positive when combined with plenty of cash and no debt. This makes for a fiscally healthy company. The dividend yield has been included. Since these companies have no debt and generate strong cash flow, the dividends should be safe. For revenue and net income, if the company has shown consistent gains over the past three fiscal years, you will see a “Y.” If the company has not shown consistent gains over the past three years, you will see an “N.”


 

Cash Position

1-Year Stock Performance

Operating Cash Flow

Dividend Yield

Revenue

Net Income

SEIC

$794 million

6.5%

$488.6 million

1.37%

Y

Y

DOX

$709 million

5.7%

$925.8 million

1.92%

Y

Y

EXPD

$602 million

20%

$655.1 million

1.00%

N

N

NHTC

$93.4 million

31%

$1.9 million

11.33%

N

N

PAYX

$995 million

34%

$1.26 billion

2.2%

Y

Y

FITB

$2.9 billion

52%

$371 million

2.64
Y Y

ISRG

$1.66 billion

6.3%

$1.48 billion

N/A

Y

Y

MNST

$796 million

-2%

$1.34 billion

N/A

Y

Y

GRMN

$1.45 billion

-1.8%

$1.28 billion

2.21%

Y

Y

TROW
$2.1 billion 1% $3.1 billion 2.71% Y Y

The Bottom Line

If you are looking for a company with no debt and one that pays a dividend and has delivered consistent revenue and net income growth over the past three fiscal years, you might want to begin your research with SEIC, DOX, and PAYX.

Dan Moskowitz owns shares of FIT. He doesn’t have any positions in any of the other stocks mentioned in the article.