Important news for shareholders and potential investors in Sky plc (LSE:SKY): The dividend payment of £0.13 per share will be distributed into shareholder on 23 April 2018, and the stock will begin trading ex-dividend at an earlier date, 22 March 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Sky’s latest financial data to analyse its dividend characteristics. See our latest analysis for Sky
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Sky pass our checks?
Sky has a trailing twelve-month payout ratio of 27.18%, which means that the dividend is covered by earnings. Going forward, analysts expect SKY’s payout to increase to 50.01% of its earnings, which leads to a dividend yield of around 2.95%. However, EPS is forecasted to fall to £0.47 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. 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, Sky generates a yield of 1.98%, which is on the low-side for Media stocks.
If Sky is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SKY’s future growth? Take a look at our free research report of analyst consensus for SKY’s outlook.
- Valuation: What is SKY 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 SKY 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.