Important news for shareholders and potential investors in George Weston Limited (TSE:WN): The dividend payment of CA$0.49 per share will be distributed to shareholders on 01 October 2018, and the stock will begin trading ex-dividend at an earlier date, 13 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine George Weston’s latest financial data to analyse its dividend characteristics.
5 questions to ask before buying a dividend stock
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 its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does George Weston pass our checks?
The current trailing twelve-month payout ratio for the stock is 36.2%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 25.3%, leading to a dividend yield of around 2.0%. However, EPS should increase to CA$5.2, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of WN it has increased its DPS from CA$1.44 to CA$1.96 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.
Relative to peers, George Weston generates a yield of 2.0%, which is high for Consumer Retailing stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank George Weston 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, 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 relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WN’s future growth? Take a look at our free research report of analyst consensus for WN’s outlook.
- Valuation: What is WN 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 WN 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.