Have you been keeping an eye on Graham Corporation’s (NYSE:GHM) upcoming dividend of $0.09 per share payable on the 28 February 2018? Then you only have 3 days left before the stock starts trading ex-dividend on the 13 February 2018. Is this future income a persuasive enough catalyst for investors to think about Graham as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. Check out our latest analysis for Graham
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Graham fare?
The current payout ratio for GHM is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. 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 GHM it has increased its DPS from $0.06 to $0.36 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. Relative to peers, Graham has a yield of 1.73%, which is high for Machinery stocks but still below the low risk savings rate.
After digging a little deeper into Graham’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential aspects you should further examine:
- 1. Future Outlook: What are well-informed industry analysts predicting for GHM’s future growth? Take a look at our free research report of analyst consensus for GHM’s outlook.
- 2. Valuation: What is GHM 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 GHM is currently mispriced by the market.
- 3. 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 pass 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.