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Phillips 66 (NYSE:PSX): 4 Days To Buy Before The Ex-Dividend Date

Important news for shareholders and potential investors in Phillips 66 (NYSE:PSX): The dividend payment of US$0.80 per share will be distributed to shareholders on 03 December 2018, and the stock will begin trading ex-dividend at an earlier date, 16 November 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Phillips 66 can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for Phillips 66

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is its annual yield among the top 25% of dividend-paying companies?

  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

  • Has dividend per share risen in the past couple of years?

  • Is is able to pay the current rate of dividends from its earnings?

  • Will it have the ability to keep paying its dividends going forward?

NYSE:PSX Historical Dividend Yield November 11th 18
NYSE:PSX Historical Dividend Yield November 11th 18

Does Phillips 66 pass our checks?

The current trailing twelve-month payout ratio for the stock is 22%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 31%, leading to a dividend yield of 3.4%. However, EPS is forecasted to fall to $9.79 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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. The reality is that it is too early to consider Phillips 66 as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Phillips 66 produces a yield of 3.2%, which is on the low-side for Oil and Gas stocks.

Next Steps:

Taking all the above into account, Phillips 66 is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. I’ve put together three pertinent aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for PSX’s future growth? Take a look at our free research report of analyst consensus for PSX’s outlook.

  2. Valuation: What is PSX 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 PSX 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 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 editorial-team@simplywallst.com.

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