Investors who want to cash in on AVX Corporation’s (NYSE:AVX) upcoming dividend of US$0.12 per share have only 4 days left to buy the shares before its ex-dividend date, 01 November 2018, in time for dividends payable on the 16 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into AVX’s latest financial data to analyse its dividend attributes.
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does AVX fit our criteria?
AVX has a trailing twelve-month payout ratio of 116%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect AVX’s payout to fall into a more sustainable range of 40% of its earnings, which leads to a dividend yield of 3.0%. Furthermore, EPS should increase to $1.42, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. In the case of AVX it has increased its DPS from $0.16 to $0.46 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, AVX generates a yield of 2.9%, which is high for Electronic stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, AVX ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for AVX’s future growth? Take a look at our free research report of analyst consensus for AVX’s outlook.
- Valuation: What is AVX 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 AVX 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.