Shares of Seagate Technology plc (NASDAQ:STX) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.63 per share, investors must have owned the shares prior to 18 September 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Should you diversify into Seagate Technology and boost your portfolio income stream? Well, keep on reading because today, 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
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 consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Seagate Technology fit our criteria?
Seagate Technology has a trailing twelve-month payout ratio of 61.4%, which means that the dividend is covered by earnings. However, going forward, analysts expect STX’s payout to fall to 42.7% of its earnings, which leads to a dividend yield of 5.2%. However, EPS should increase to $5.62, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Seagate Technology has a yield of 5.1%, which is high for Tech stocks.
Keeping in mind the dividend characteristics above, Seagate Technology is definitely worth considering for investors looking to build a dedicated income portfolio. 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. Below, I’ve compiled three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for STX’s future growth? Take a look at our free research report of analyst consensus for STX’s outlook.
- Valuation: What is STX 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 STX 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.