On the 14 December 2018, The Eastern Company (NASDAQ:EML) will be paying shareholders an upcoming dividend amount of US$0.11 per share. However, investors must have bought the company’s stock before 13 November 2018 in order to qualify for the payment. That means you have only 4 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Eastern’s latest financial data to analyse its dividend characteristics.
Here’s how I find good dividend stocks
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 consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown 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 Eastern pass our checks?
The current trailing twelve-month payout ratio for the stock is 28%, 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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. EML has increased its DPS from $0.36 to $0.44 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, Eastern produces a yield of 1.5%, which is on the low-side for Machinery stocks.
Considering the dividend attributes we analyzed above, Eastern 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 aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for EML’s future growth? Take a look at our free research report of analyst consensus for EML’s outlook.
- Valuation: What is EML 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 EML 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 email@example.com.