Have you been keeping an eye on Dunelm Group plc’s (LON:DNLM) upcoming dividend of UK£0.20 per share payable on the 07 December 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 15 November 2018. Should you diversify into Dunelm Group 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.
5 questions I ask before picking 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?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Dunelm Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 73%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 62%, leading to a dividend yield of 4.6%. However, EPS should increase to £0.43, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering 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.
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 DNLM it has increased its DPS from £0.055 to £0.27 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Dunelm Group generates a yield of 4.2%, which is high for Specialty Retail stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Dunelm Group is definitely worth keeping an eye on for someone looking to build a dedicated income 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. Below, I’ve compiled three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for DNLM’s future growth? Take a look at our free research report of analyst consensus for DNLM’s outlook.
- Valuation: What is DNLM 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 DNLM 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.