Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Investors who want to cash in on NVE Corporation's (NASDAQ:NVEC) upcoming dividend of US$1.00 per share have only 1 days left to buy the shares before its ex-dividend date, 10 May 2019, in time for dividends payable on the 31 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into NVE's latest financial data to analyse its dividend attributes.
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 its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
Does NVE pass our checks?
The current trailing twelve-month payout ratio for NVEC is 134%, meaning the dividend is not sufficiently covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. The reality is that it is too early to consider NVE as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, NVE produces a yield of 4.5%, which is high for Semiconductor stocks.
Now you know to keep in mind the reason why investors should be careful investing in NVE 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NVEC’s future growth? Take a look at our free research report of analyst consensus for NVEC’s outlook.
- Valuation: What is NVEC 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 NVEC 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 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.