If you are interested in cashing in on The Greenbrier Companies, Inc.’s (NYSE:GBX) upcoming dividend of US$0.25 per share, you only have 3 days left to buy the shares before its ex-dividend date, 29 January 2019, in time for dividends payable on the 20 February 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Greenbrier Companies’s most recent financial data to examine its dividend characteristics in more detail.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- 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?
- 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 Greenbrier Companies pass our checks?
The company currently pays out 22% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 25% which, assuming the share price stays the same, leads to a dividend yield of 2.6%. However, EPS is forecasted to fall to $4.32 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. GBX has increased its DPS from $0.16 to $1 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.
Compared to its peers, Greenbrier Companies has a yield of 2.5%, which is high for Machinery stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Greenbrier Companies is definitely worth considering for investors looking to build a dedicated income portfolio. 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 key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for GBX’s future growth? Take a look at our free research report of analyst consensus for GBX’s outlook.
- Valuation: What is GBX 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 GBX 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.