On the 16 July 2018, Western Digital Corporation (NASDAQ:WDC) will be paying shareholders an upcoming dividend amount of US$0.50 per share. However, investors must have bought the company’s stock before 28 June 2018 in order to qualify for the payment. That means you have only 2 days left! 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 Western Digital’s most recent financial data to examine its dividend characteristics in more detail. Check out our latest analysis for Western Digital
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 dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Western Digital pass our checks?
The company currently pays out more than double of its earnings as a dividend, according to its trailing trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 15.80%, leading to a dividend yield of around 2.59%. In addition to this, EPS should increase to $6.17, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Western Digital as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Western Digital produces a yield of 2.51%, which is high for Tech stocks but still below the market’s top dividend payers.
After digging a little deeper into Western Digital’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for WDC’s future growth? Take a look at our free research report of analyst consensus for WDC’s outlook.
- Valuation: What is WDC 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 WDC 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 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.