If you are an income investor, then Victrex plc (LON:VCT) should be on your radar. Victrex plc, through its subsidiaries, manufactures and sells polymers worldwide. Over the past 10 years, the UK£1.6b market cap company has been growing its dividend payments, from £0.18 to £1.42. Currently yielding 7.5%, let's take a closer look at Victrex's dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It has the ability to keep paying its dividends going forward
High Yield And Dependable
The company's dividend yield stands at 7.5%, which is high for Chemicals stocks. But the real reason Victrex stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
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. In the case of VCT it has increased its DPS from £0.18 to £1.42 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 VCT a true dividend rockstar.
The company currently pays out 52% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 68% which, assuming the share price stays the same, leads to a dividend yield of around 4.0%. However, EPS is forecasted to fall to £1.12 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Investors of Victrex can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Victrex is one worth keeping around. However, given 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. Below, I've compiled three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for VCT’s future growth? Take a look at our free research report of analyst consensus for VCT’s outlook.
- Valuation: What is VCT 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 VCT is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better 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 firstname.lastname@example.org. 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.