Have you been keeping an eye on Pentair plc's (NYSE:PNR) upcoming dividend of US$0.18 per share payable on the 03 May 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 17 April 2019. Is this future income a persuasive enough catalyst for investors to think about Pentair as an investment today? Below, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- 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 Pentair fare?
The current trailing twelve-month payout ratio for the stock is 57%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 33% which, assuming the share price stays the same, leads to a dividend yield of 2.0%. However, EPS should increase to $2.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Not only have dividend payouts from Pentair fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Pentair produces a yield of 1.8%, which is on the low-side for Machinery stocks.
If you are building an income portfolio, then Pentair is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PNR’s future growth? Take a look at our free research report of analyst consensus for PNR’s outlook.
- Valuation: What is PNR 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 PNR 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.