Investors who want to cash in on Micro-Mechanics (Holdings) Ltd’s (SGX:5DD) upcoming dividend of S$0.06 per share have only 4 days left to buy the shares before its ex-dividend date, 02 November 2018, in time for dividends payable on the 20 November 2018. Should you diversify into Micro-Mechanics (Holdings) and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Micro-Mechanics (Holdings) fare?
Micro-Mechanics (Holdings) has a trailing twelve-month payout ratio of 73%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Micro-Mechanics (Holdings) has a yield of 6.2%, which is on the low-side for Semiconductor stocks.
Whilst there are few things you may like about Micro-Mechanics (Holdings) from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 key factors you should further research:
- Valuation: What is 5DD 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 5DD is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Micro-Mechanics (Holdings)’s board and the CEO’s back ground.
- 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 firstname.lastname@example.org.