On the 17 September 2018, Ellington Financial LLC (NYSE:EFC) will be paying shareholders an upcoming dividend amount of US$0.41 per share. However, investors must have bought the company’s stock before 30 August 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 Ellington Financial’s most recent financial data to examine its dividend characteristics in more detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 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 risen in the past couple of years?
- 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 Ellington Financial fit our criteria?
Ellington Financial has a trailing twelve-month payout ratio of 93.1%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a higher payout ratio of 104%, leading to a dividend yield of around 9.8%. Moreover, EPS should increase to $1.84. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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. The reality is that it is too early to consider Ellington Financial as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Ellington Financial produces a yield of 9.8%, which is high for Capital Markets stocks.
Now you know to keep in mind the reason why investors should be careful investing in Ellington Financial for the dividend. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for EFC’s future growth? Take a look at our free research report of analyst consensus for EFC’s outlook.
- Valuation: What is EFC 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 EFC 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 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.