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Investors who want to cash in on Tyson Foods, Inc.’s (NYSE:TSN) upcoming dividend of US$0.38 per share have only 3 days left to buy the shares before its ex-dividend date, 28 February 2019, in time for dividends payable on the 15 March 2019. Is this future income a persuasive enough catalyst for investors to think about Tyson Foods 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.
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:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Tyson Foods fare?
Tyson Foods has a trailing twelve-month payout ratio of 23%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect TSN’s payout to remain around the same level at 23% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.6%. Furthermore, EPS should increase to $5.99.
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. In the case of TSN it has increased its DPS from $0.16 to $1.5 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. This is an impressive feat, which makes TSN a true dividend rockstar.
Compared to its peers, Tyson Foods has a yield of 2.4%, which is on the low-side for Food stocks.
Considering the dividend attributes we analyzed above, Tyson Foods is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for TSN’s future growth? Take a look at our free research report of analyst consensus for TSN’s outlook.
- Valuation: What is TSN 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 TSN 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 email@example.com. 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.