Important news for shareholders and potential investors in PPHE Hotel Group Limited (LON:PPH): The dividend payment of UK£0.19 per share will be distributed to shareholders on 20 May 2019, and the stock will begin trading ex-dividend at an earlier date, 25 April 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine PPHE Hotel Group's latest financial data to analyse its dividend characteristics.
5 questions to ask before buying 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?
- Does it consistently pay out dividends without missing a payment of significantly 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?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does PPHE Hotel Group fare?
PPHE Hotel Group has a trailing twelve-month payout ratio of 39%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PPH's payout to increase to 51% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.6%. However, EPS is forecasted to fall to £0.77 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering 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 there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Unfortunately, it is really too early to view PPHE Hotel Group as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, PPHE Hotel Group has a yield of 2.3%, which is on the low-side for Hospitality stocks.
Whilst there are few things you may like about PPHE Hotel Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. I've put together three relevant factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PPH’s future growth? Take a look at our free research report of analyst consensus for PPH’s outlook.
- Valuation: What is PPH 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 PPH 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.