Is Accenture a Buy Right Now?

When evaluating whether Accenture plc (ACN) is a “buy” right now, a comprehensive analysis of its dividend and financial stability against key criteria can guide investment decisions. Here’s an in-depth look at Accenture’s performance based on a detailed assessment relevant to dividend stocks.

1. Blue-Chip Stock Status

Result: Yes

Accenture, a globally renowned IT consulting firm, holds a solid blue-chip status due to its market reputation, longevity, and consistent financial stability. It’s a leader in digital, cloud, and security services and is ranked as one of the top 500 brands globally.

2. Brand Ranking

• Result: Yes
• With a brand ranking of 34, Accenture is well-recognized worldwide. This high rank supports its reliability and competitive positioning in the technology consulting sector.

3. 10-Year Annualized Growth

• • Revenue Growth: 7.38% (Below Target)
• • Net Income Growth: 10.44%
  • EPS Growth: 10.56%
• Accenture demonstrates strong growth in net income and EPS, but its revenue growth falls slightly short of the 10% target.

4. Valuation Metrics

• • P/E Ratio: 31.21
  • Price-to-Book Ratio: 8.02
• Accenture’s P/E ratio aligns with its sector, suggesting fair valuation based on earnings. However, a high price-to-book ratio of 8.02 may indicate that it is overvalued, which investors should consider in their decision-making process.

5. Profitability Metrics

• • Net Profit Margin: 11.19%
• • Return on Equity (ROE): 26.46%
• • Return on Assets (ROA): 12.99%
  • Return on Invested Capital (ROIC): 25.27%
• While Accenture has impressive ROE, ROA, and ROIC, its net profit margin of 11.19% falls short of the recommended 15%, suggesting room for improvement in operational efficiency.

6. Dividend Health

• • Dividend Payout Ratio: 44.57%
  • Total Yield (Dividend Yield + Share Buyback Yield): 3.31%
• Accenture’s payout ratio is comfortably below the 70% benchmark, indicating a safe and sustainable dividend. However, its total yield, combining dividend yield and share buybacks, is below the 5% target, which may be a drawback for income-focused investors.

7. Financial Stability and Debt Ratios

• • Debt-to-Equity Ratio: 0.04
  • Debt-to-Assets Ratio: 0.02
• With low debt levels, Accenture demonstrates excellent financial health. These favorable debt ratios underscore its ability to manage obligations without compromising shareholder value.

8. Intrinsic Value and Competitive Advantage

• • Fair Value (Morningstar): $307 (Current Price Above Fair Value)
  • Economic Moat: Wide
• Morningstar’s fair value estimate for Accenture is $307, suggesting it may be overvalued at current levels. However, its wide economic moat indicates strong competitive advantages, a favorable factor for long-term growth.

9. ESG and Risk Ratings

• ESG Score: 70.82
• Accenture scores well on environmental, social, and governance (ESG) factors, a growing consideration for many investors. Its “medium” ESG risk level shows a balanced approach to corporate responsibility.

10. Dividend Consistency

• Dividend Stability: Slightly inconsistent (2019 year broke this consistency)

• While Accenture has a history of dividends, the lack of consistent increases could be a minor drawback for dividend growth investors who prioritize steady dividend growth over time.

Final Assessment: Is Accenture a Buy?

With a score of 7.78 out of 10 according to The Dividend Prince, Accenture meets many of the essential criteria for a solid dividend stock but has some areas for improvement, such as revenue growth, price-to-book ratio, and dividend stability. Here’s a quick summary:

• Strengths: Blue-chip status, strong brand ranking, high ROE, low debt ratios, wide economic moat, and a solid ESG score.
• Weaknesses: Overvaluation concerns (P/B ratio), revenue growth below target, and inconsistent dividend growth.

For income-focused investors, Accenture may not provide the highest yields, but its financial health and long-term growth potential make it a strong contender for a diversified dividend portfolio.

Disclaimer: This analysis is based on current data and should not be considered as financial advice. Always conduct your own research and consider consulting with a financial advisor before making investment decisions.