What To Know Before Buying Oxford Instruments plc (LON:OXIG) For Its Dividend
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Oxford Instruments plc (LON:OXIG) has paid a dividend to shareholders. It currently yields 1.6%. Let’s dig deeper into whether Oxford Instruments should have a place in your portfolio.
Check out our latest analysis for Oxford Instruments
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Oxford Instruments fare?
The company currently pays out 41% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 22%, leading to a dividend yield of around 1.7%. However, EPS should increase to £0.53, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. OXIG has increased its DPS from £0.084 to £0.13 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. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Oxford Instruments produces a yield of 1.6%, which is on the low-side for Electronic stocks.
Next Steps:
With this in mind, I definitely rank Oxford Instruments as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 essential factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for OXIG’s future growth? Take a look at our free research report of analyst consensus for OXIG’s outlook.
Valuation: What is OXIG 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 OXIG 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 editorial-team@simplywallst.com.
