Have you been keeping an eye on Deswell Industries Inc’s (NASDAQ:DSWL) upcoming dividend of US$0.06 per share payable on the 18 December 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 26 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Deswell Industries’s latest financial data to analyse its dividend attributes.
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Deswell Industries fit our criteria?
Deswell Industries has a trailing twelve-month payout ratio of 30%, which means that the dividend is 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.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Dividend payments from Deswell Industries have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, Deswell Industries has a yield of 3.7%, which is high for Electronic stocks.
Whilst there are few things you may like about Deswell Industries 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for DSWL’s future growth? Take a look at our free research report of analyst consensus for DSWL’s outlook.
- Historical Performance: What has DSWL’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.