Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
Shares of Cadence Bancorporation (NYSE:CADE) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.17 per share, investors must have owned the shares prior to 28 February 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Cadence Bancorporation as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able 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 Cadence Bancorporation pass our checks?
Cadence Bancorporation has a trailing twelve-month payout ratio of 28%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 38% which, assuming the share price stays the same, leads to a dividend yield of 3.6%. In addition to this, EPS should increase to $2.07. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Cadence Bancorporation as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
Compared to its peers, Cadence Bancorporation has a yield of 3.5%, which is high for Banks stocks but still below the market’s top dividend payers.
Taking all the above into account, Cadence Bancorporation is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CADE’s future growth? Take a look at our free research report of analyst consensus for CADE’s outlook.
- Valuation: What is CADE 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 CADE 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.