There is a lot to be liked about Seagate Technology plc (NASDAQ:STX) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 6.4% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Seagate Technology should have a place in your portfolio.
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is 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 Seagate Technology fare?
The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of around 6.6%. Moreover, EPS is forecasted to fall to $4.55 in the upcoming year.
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 there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of STX it has increased its DPS from $0.48 to $2.52 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, Seagate Technology has a yield of 6.4%, which is high for Tech stocks.
Considering the dividend attributes we analyzed above, Seagate Technology is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. I’ve put together three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for STX’s future growth? Take a look at our free research report of analyst consensus for STX’s outlook.
- Valuation: What is STX 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 STX 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 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.