Investors who want to cash in on Culp Inc’s (NYSE:CULP) upcoming dividend of US$0.09 per share have only 2 days left to buy the shares before its ex-dividend date, 29 June 2018, in time for dividends payable on the 16 July 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Culp can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes. Check out our latest analysis for Culp
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How does Culp fare?
The current trailing twelve-month payout ratio for the stock is 20.24%, 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.
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 Culp 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, Culp has a yield of 2.17%, which is high for Luxury stocks but still below the market’s top dividend payers.
After digging a little deeper into Culp’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. There are three fundamental aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CULP’s future growth? Take a look at our free research report of analyst consensus for CULP’s outlook.
- Valuation: What is CULP 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 CULP 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.
To help readers see pass 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.