Is Simpson Manufacturing Co Inc (NYSE:SSD) A Smart Choice For Dividend Investors?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Simpson Manufacturing Co Inc (NYSE:SSD) has paid a dividend to shareholders. It currently yields 1.6%. Does Simpson Manufacturing tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Simpson Manufacturing
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
How does Simpson Manufacturing fare?
Simpson Manufacturing has a trailing twelve-month payout ratio of 24%, meaning the dividend is sufficiently 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.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. SSD has increased its DPS from $0.40 to $0.88 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.
Compared to its peers, Simpson Manufacturing produces a yield of 1.6%, which is on the low-side for Building stocks.
Next Steps:
Taking into account the dividend metrics, Simpson Manufacturing 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 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 essential factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for SSD’s future growth? Take a look at our free research report of analyst consensus for SSD’s outlook.
Valuation: What is SSD 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 SSD 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 editorial-team@simplywallst.com.
