On the 01 July 2018, Imperial Oil Limited (TSX:IMO) will be paying shareholders an upcoming dividend amount of CA$0.19 per share. However, investors must have bought the company’s stock before 31 May 2018 in order to qualify for the payment. That means you have only 3 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Imperial Oil’s latest financial data to analyse its dividend attributes. View our latest analysis for Imperial Oil
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Imperial Oil fare?
The current trailing twelve-month payout ratio for the stock is 79.72%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect IMO’s payout to fall to 23.68% of its earnings, which leads to a dividend yield of around 1.74%. However, EPS should increase to CA$2.51, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. IMO has increased its DPS from CA$0.36 to CA$0.76 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. This is an impressive feat, which makes IMO a true dividend rockstar. Relative to peers, Imperial Oil produces a yield of 1.86%, which is on the low-side for Oil and Gas stocks.
Considering the dividend attributes we analyzed above, Imperial Oil 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 fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for IMO’s future growth? Take a look at our free research report of analyst consensus for IMO’s outlook.
- Valuation: What is IMO 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 IMO 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 pass 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.