Investors who want to cash in on Seaspan Corporation's (NYSE:SSW) upcoming dividend of US$0.13 per share have only 3 days left to buy the shares before its ex-dividend date, 18 April 2019, in time for dividends payable on the 30 April 2019. Is this future income a persuasive enough catalyst for investors to think about Seaspan 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 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 the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Seaspan pass our checks?
The current trailing twelve-month payout ratio for the stock is 37%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of around 5.0%. However, EPS is forecasted to fall to $0.92 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering 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 facing SSW investors is that whilst it has continued to pay shareholders dividend, dividends are lower today, than they were a decade ago. However, income investors that value stability over growth may still find SSW appealing.
In terms of its peers, Seaspan has a yield of 5.0%, which is on the low-side for Shipping stocks.
Taking into account the dividend metrics, Seaspan 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SSW’s future growth? Take a look at our free research report of analyst consensus for SSW’s outlook.
- Valuation: What is SSW 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 SSW 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.
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.