Important news for shareholders and potential investors in Spectris plc (LON:SXS): The dividend payment of UK£0.20 per share will be distributed to shareholders on 09 November 2018, and the stock will begin trading ex-dividend at an earlier date, 11 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Spectris’s latest financial data to analyse its dividend characteristics.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- 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?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does Spectris fit our criteria?
The current trailing twelve-month payout ratio for the stock is 24%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 37%, leading to a dividend yield of around 2.8%. However, EPS is forecasted to fall to £1.4 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. SXS has increased its DPS from £0.22 to £0.56 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.
In terms of its peers, Spectris generates a yield of 2.5%, which is high for Electronic stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Spectris as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. There are three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SXS’s future growth? Take a look at our free research report of analyst consensus for SXS’s outlook.
- Valuation: What is SXS 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 SXS 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 email@example.com.