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Have you been keeping an eye on Spectrum Brands Holdings, Inc.'s (NYSE:SPB) upcoming dividend of US$0.42 per share payable on the 04 June 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 13 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Spectrum Brands Holdings's latest financial data to analyse its dividend attributes.
Here's how I find good dividend stocks
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 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?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Spectrum Brands Holdings pass our checks?
The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 41% which, assuming the share price stays the same, leads to a dividend yield of 2.8%. However, EPS is forecasted to fall to $2.06 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. The reality is that it is too early to consider Spectrum Brands Holdings as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there's a long road ahead before we can ascertain whether SPB one as a stable dividend player.
In terms of its peers, Spectrum Brands Holdings generates a yield of 2.7%, which is on the low-side for Household Products stocks.
Taking all the above into account, Spectrum Brands Holdings is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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. Below, I've compiled three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SPB’s future growth? Take a look at our free research report of analyst consensus for SPB’s outlook.
- Valuation: What is SPB 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 SPB 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.