Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Systemax Inc. (NYSE:SYX) has been paying a dividend to shareholders. Today it yields 2.4%. Does Systemax tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% 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?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Systemax fit our criteria?
Systemax has a trailing twelve-month payout ratio of 33%, 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.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. SYX investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Compared to its peers, Systemax produces a yield of 2.4%, which is on the low-side for Trade Distributors stocks.
Whilst there are few things you may like about Systemax from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SYX’s future growth? Take a look at our free research report of analyst consensus for SYX’s outlook.
- Valuation: What is SYX 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 SYX 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.