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If you are interested in cashing in on Parker-Hannifin Corporation’s (NYSE:PH) upcoming dividend of US$0.76 per share, you only have 4 days left to buy the shares before its ex-dividend date, 07 February 2019, in time for dividends payable on the 01 March 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Parker-Hannifin can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able 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?
Does Parker-Hannifin pass our checks?
The current trailing twelve-month payout ratio for the stock is 33%, which means that the dividend is covered by earnings. However, going forward, analysts expect PH’s payout to fall to 23% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.9%. However, EPS should increase to $11.6, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of PH it has increased its DPS from $1 to $3.04 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Parker-Hannifin produces a yield of 1.8%, which is on the low-side for Machinery stocks.
With this in mind, I definitely rank Parker-Hannifin 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, 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. I’ve put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PH’s future growth? Take a look at our free research report of analyst consensus for PH’s outlook.
- Valuation: What is PH 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 PH 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 firstname.lastname@example.org.