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If you are interested in cashing in on Southwest Gas Holdings, Inc.’s (NYSE:SWX) upcoming dividend of US$0.52 per share, you only have 4 days left to buy the shares before its ex-dividend date, 14 February 2019, in time for dividends payable on the 01 March 2019. Should you diversify into Southwest Gas Holdings and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 dividend per share risen in the past couple of years?
- 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 well does Southwest Gas Holdings fit our criteria?
Southwest Gas Holdings has a trailing twelve-month payout ratio of 47%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 54% which, assuming the share price stays the same, leads to a dividend yield of 2.9%. However, EPS is forecasted to fall to $3.97 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 SWX it has increased its DPS from $0.90 to $2.08 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 SWX a true dividend rockstar.
Compared to its peers, Southwest Gas Holdings has a yield of 2.6%, which is high for Gas Utilities stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Southwest Gas Holdings is definitely worth considering for investors looking to build a dedicated income portfolio. Given that 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. I’ve put together three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SWX’s future growth? Take a look at our free research report of analyst consensus for SWX’s outlook.
- Historical Performance: What has SWX’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 firstname.lastname@example.org.