Have you been keeping an eye on PulteGroup, Inc.’s (NYSE:PHM) upcoming dividend of US$0.11 per share payable on the 03 April 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 14 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine PulteGroup’s latest financial data to analyse its dividend characteristics.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does PulteGroup fare?
PulteGroup has a trailing twelve-month payout ratio of 10%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 13% which, assuming the share price stays the same, leads to a dividend yield of 1.6%. However, EPS is forecasted to fall to $3.17 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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. The reality is that it is too early to consider PulteGroup 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.
Compared to its peers, PulteGroup has a yield of 1.6%, which is on the low-side for Consumer Durables stocks.
Whilst there are few things you may like about PulteGroup 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 fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PHM’s future growth? Take a look at our free research report of analyst consensus for PHM’s outlook.
- Valuation: What is PHM 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 PHM 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.