Have you been keeping an eye on Parker-Hannifin Corporation’s (NYSE:PH) upcoming dividend of US$0.76 per share payable on the 14 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 27 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Parker-Hannifin can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
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?
- 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?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Parker-Hannifin fare?
Parker-Hannifin has a trailing twelve-month payout ratio of 34.4%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect PH’s payout to fall to 25.6% of its earnings, which leads to a dividend yield of around 1.8%. However, EPS should increase to $11.18, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. In the case of PH it has increased its DPS from $1 to $3.04 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Parker-Hannifin produces a yield of 1.8%, which is on the low-side for Machinery stocks.
Considering the dividend attributes we analyzed above, Parker-Hannifin is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. Below, I’ve compiled three fundamental aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PH’s future growth? Take a look at our free research report of analyst consensus for PH’s outlook.
- Valuation: What is PH 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 PH 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.