Is This Small Cap Stock’s Dividend Yield Worth the Price?

Dividend investors should consider picking up shares of PETS

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PetMed Express, Inc. (NASDAQ:PETS) is an online pet pharmacy based in the U.S. that is licensed to dispense prescription medications in all 50 states. PETS sells prescription pet medications, non-prescription pet medications, nutritional supplements, and other health products for dogs, cats, and horses directly to consumers through their website. The small-cap company is currently valued at $461 million. PETS closed Monday at $22.08.

PetMed stock has decreased about 32% year-over-year and PETS is currently trading down 40% since reaching a 52-week high of $36.75 last June. Additionally, shares of PETS have dropped 16% year-to-date and are about breakeven over the past month. However, PetMed stock has notably recovered 15% since bottoming at a 52-week low of $19.09 in late May.

Still, PetMed stock’s valuation remains high relative to the business’s growth rate. PETS currently trades at a price-earnings ratio of 21.13 and a price-sales ratio of 1.49.

The online pet pharmacy has an excellent balance sheet with $111.08 million in cash and no debt, allowing it to continue paying its dividend yield comfortably. Moreover, PETS offers a very attractive dividend yield of 5.46% with a forward dividend of $1.20, making PetMed stock a strong buy candidate despite its high valuation.

Meanwhile, shorts have been piling on. Over the past two reporting periods, short interest has jumped more than 18%, and now accounts for 24.8% of the stock's total available float, or nearly 12 days' worth of pent-up buying power.

Options are looking affordable on PetMed Express stock, too. The security sports a Schaeffer's Volatility Index (SVI) of 55%, which sits higher than just 21% of readings from the past year. In other words, options players are pricing in relatively low volatility expectations at the moment. 

 
 
 

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