Attention dividend hunters! CanWel Building Materials Group Ltd (TSE:CWX) will be distributing its dividend of CA$0.14 per share on the 15 October 2018, and will start trading ex-dividend in 3 days time on the 27 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into CanWel Building Materials Group’s latest financial data to analyse its dividend attributes.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does CanWel Building Materials Group pass our checks?
The current trailing twelve-month payout ratio for CWX is 109%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect CWX’s payout to reduce to 94.8% of its earnings, which leads to a dividend yield of 9.8%. However, EPS should increase to CA$0.52, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from CanWel Building Materials Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, CanWel Building Materials Group generates a yield of 9.8%, which is high for Trade Distributors stocks.
Now you know to keep in mind the reason why investors should be careful investing in CanWel Building Materials Group for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CWX’s future growth? Take a look at our free research report of analyst consensus for CWX’s outlook.
- Valuation: What is CWX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CWX is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.