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Attention dividend hunters! McGrath RentCorp (NASDAQ:MGRC) will be distributing its dividend of US$0.38 per share on the 30 April 2019, and will start trading ex-dividend in 4 days time on the 12 April 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding McGrath RentCorp can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does McGrath RentCorp fit our criteria?
McGrath RentCorp has a trailing twelve-month payout ratio of 41%, which means that the dividend is covered by earnings. Going forward, analysts expect MGRC's payout to remain around the same level at 39% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.6%. Furthermore, EPS should increase to $3.38.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. MGRC has increased its DPS from $0.88 to $1.5 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes MGRC a true dividend rockstar.
Compared to its peers, McGrath RentCorp has a yield of 2.6%, which is high for Commercial Services stocks but still below the market's top dividend payers.
With this in mind, I definitely rank McGrath RentCorp 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 relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for MGRC’s future growth? Take a look at our free research report of analyst consensus for MGRC’s outlook.
- Valuation: What is MGRC 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 MGRC 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.
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.