Is Buying Pearson plc (LON:PSON) For Its Upcoming £0.12 Dividend A Good Choice?
Important news for shareholders and potential investors in Pearson plc (LSE:PSON): The dividend payment of £0.12 per share will be distributed into shareholder on 11 May 2018, and the stock will begin trading ex-dividend at an earlier date, 05 April 2018. Should you diversify into Pearson 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. See our latest analysis for Pearson
How I analyze 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 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 it able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How does Pearson fare?
The company currently pays out 34.06% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect PSON’s payout to remain around the same level at 37.03% of its earnings, which leads to a dividend yield of 2.70%. Furthermore, EPS is forecasted to fall to £0.24 in the upcoming year. 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. Not only have dividend payouts from Pearson fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, Pearson generates a yield of 2.27%, which is on the low-side for Media stocks.
Next Steps:
Taking all the above into account, Pearson 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 key factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for PSON’s future growth? Take a look at our free research report of analyst consensus for PSON’s outlook.
Valuation: What is PSON 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 PSON 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.
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.
