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Shares of Psychemedics Corporation (NASDAQ:PMD) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.18 per share, investors must have owned the shares prior to 01 November 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Psychemedics 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.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is their annual yield among the top 25% of dividend payers?
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?
Is its earnings sufficient to payout dividend at the current rate?
Will it have the ability to keep paying its dividends going forward?
How well does Psychemedics fit our criteria?
The current trailing twelve-month payout ratio for the stock is 63%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although PMD’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Psychemedics has a yield of 4.3%, which is high for Healthcare stocks.
Taking into account the dividend metrics, Psychemedics ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 important factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for PMD’s future growth? Take a look at our free research report of analyst consensus for PMD’s outlook.
Valuation: What is PMD 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 PMD 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.