On the 26 September 2018, Educational Development Corporation (NASDAQ:EDUC) will be paying shareholders an upcoming dividend amount of US$0.05 per share. However, investors must have bought the company’s stock before 14 September 2018 in order to qualify for the payment. That means you have only 3 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Educational Development can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Will it be able to continue to payout at the current rate in the future?
How well does Educational Development fit our criteria?
Educational Development has a trailing twelve-month payout ratio of 7.0%, meaning the dividend is sufficiently 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 company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Educational Development has a yield of 1.7%, which is on the low-side for Retail Distributors stocks.
If you are building an income portfolio, then Educational Development is a complicated choice since it has some positive aspects as well as negative ones. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for EDUC’s future growth? Take a look at our free research report of analyst consensus for EDUC’s outlook.
Valuation: What is EDUC 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 EDUC 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.
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.