Income Stock of the Week: Deluxe Corporation (DLX)

Despite economic fears in the U.S., business continues to hum along. And at the heart of many businesses, both large and small, is the payment processor and business operations service provider, which is where Deluxe Corporation (DLX) comes in. 

Deluxe delivers a broad range of business services, from payment processing (they processed over $2.8 trillion in transactions last year), to data driven marketing, to managing and optimizing customer websites. 

One of the things I like about the Deluxe business model is that once the process is in place, the business itself is very scalable and can grow into a very high margin endeavor. 

The company is hitting on all cylinders as pointed out by CEO Barry McCarthy in the latest earnings release. McCarthy noted, “Our momentum continues, as comparable adjusted revenue increases in all four segments put us on a solid trajectory for our third consecutive year of comparable adjusted revenue growth…[and] we are raising our full-year 2023 guidance for revenue and earnings.”

I also like the fact that Deluxe sold off its lower margin web hosting business, the sale of which closed in the most recent quarter. 

Currently DLX is posting gross margins close to 54% and trades at 5.7x projected earnings. The company pays a dividend of over 6%, and only trades at 0.37x sales. 

Deluxe has an overall B rating in our POWR Ratings, where it scores 93% higher than all the stocks in our database. Its strongest component rating is in the Growth component where it is in the top 95.78% of companies. 

What To Do Next?

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DLX shares were unchanged in after-hours trading Tuesday. Year-to-date, DLX has gained 13.20%, versus a 11.46% rise in the benchmark S&P 500 index during the same period.

Jay is a former professional market maker who cut his teeth trading on the floor of the CBOE. With more than 20 years of experience trading and investing, his focus is on making professional strategies accessible to everyone, which is exactly what does in his highly profitable POWR Income and POWR Stocks Under $10 investment advisory services.

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