Should Swiss Water Decaffeinated Coffee Inc. (TSE:SWP) Be Part Of Your Income Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Swiss Water Decaffeinated Coffee Inc. (TSE:SWP) has been paying a dividend to shareholders. Today it yields 4.9%. Should it have a place in your portfolio? Let’s take a look at Swiss Water Decaffeinated Coffee in more detail.
View our latest analysis for Swiss Water Decaffeinated Coffee
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5 questions to ask before buying 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 its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
How does Swiss Water Decaffeinated Coffee fare?
The company currently pays out 70% of its earnings as a dividend, according to its trailing twelve-month data, 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 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.
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. Not only have dividend payouts from Swiss Water Decaffeinated Coffee fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, Swiss Water Decaffeinated Coffee generates a yield of 4.9%, which is high for Food stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Swiss Water Decaffeinated Coffee for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. I’ve put together three relevant aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for SWP’s future growth? Take a look at our free research report of analyst consensus for SWP’s outlook.
Historical Performance: What has SWP’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
