Investors who want to cash in on Extended Stay America Inc’s (NASDAQ:STAY) upcoming dividend of US$0.22 per share have only 4 days left to buy the shares before its ex-dividend date, 14 November 2018, in time for dividends payable on the 29 November 2018. Is this future income a persuasive enough catalyst for investors to think about Extended Stay America as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
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:
- Is it the top 25% annual dividend yield payer?
- 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 the company be able to keep paying dividend based on the future earnings growth?
How well does Extended Stay America fit our criteria?
The current trailing twelve-month payout ratio for the stock is 78%, which means that the dividend is covered by earnings. Going forward, analysts expect STAY’s payout to remain around the same level at 74% of its earnings, which leads to a dividend yield of 4.8%. In addition to this, EPS is forecasted to fall to $0.76 in the upcoming year.
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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Extended Stay America as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Extended Stay America produces a yield of 4.8%, which is high for Hospitality stocks.
With these dividend metrics in mind, I definitely rank Extended Stay America as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for STAY’s future growth? Take a look at our free research report of analyst consensus for STAY’s outlook.
- Valuation: What is STAY 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 STAY 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.