Is Buying Associated British Foods plc (LON:ABF) For Its Upcoming £0.12 Dividend A Good Choice?
If you are interested in cashing in on Associated British Foods plc’s (LSE:ABF) upcoming dividend of £0.12 per share, you only have 9 days left to buy the shares before its ex-dividend date, 07 June 2018, in time for dividends payable on the 06 July 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Associated British Foods’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Associated British Foods
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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 risen in the past couple of years?
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 Associated British Foods pass our checks?
Associated British Foods has a trailing twelve-month payout ratio of 31.32%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 31.84%, leading to a dividend yield of 1.77%. Furthermore, EPS should increase to £1.39. 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. In the case of ABF it has increased its DPS from £0.2 to £0.41 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. Relative to peers, Associated British Foods generates a yield of 1.51%, which is on the low-side for Food stocks.
Next Steps:
With this in mind, I definitely rank Associated British Foods as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 important aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for ABF’s future growth? Take a look at our free research report of analyst consensus for ABF’s outlook.
Valuation: What is ABF 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 ABF is currently mispriced by the market.
Other 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 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.
