Important news for shareholders and potential investors in Newtek Business Services Corp (NASDAQ:NEWT): The dividend payment of $0.44 per share will be distributed into shareholder on 28 December 2017, and the stock will begin trading ex-dividend at an earlier date, 15 December 2017. Is this future income stream a compelling catalyst for dividend investors to think about NEWT as an investment today? Let’s take a look at NEWT’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Newtek Businessrvices
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Newtek Businessrvices fare?
Newtek Businessrvices has a payout ratio of 96.95%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a payout ratio of 90.27%, leading to a dividend yield of 9.17%. In addition to this, EPS should increase to $1.85. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Newtek Businessrvices as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, NEWT generates a yield of 8.86%, which is high for capital markets stocks.
What this means for you:
Are you a shareholder? You may be wondering why Newtek Businessrvices is paying out dividends at all, instead of re-investing into the business to generate higher cash flows in the future. It may be worth exploring other dividend stocks as alternatives to NEWT or even look at high-growth stocks to complement your steady income stocks. I encourage you to continue your research by exploring my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? Now you know to keep in mind the reason why investors should be careful investing in NEWT for the dividend. But if you are not exclusively a dividend investor, NEWT could still be an interesting investment opportunity. As always, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Dig deeper in our latest free fundmental analysis to explore other aspects of NEWT.
To help readers see pass 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.