If you are interested in cashing in on UCB SA's (EBR:UCB) upcoming dividend of €0.85 per share, you only have 3 days left to buy the shares before its ex-dividend date, 26 April 2019, in time for dividends payable on the 30 April 2019. Is this future income a persuasive enough catalyst for investors to think about UCB 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:
- 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 dividend per share amount increased 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?
Does UCB pass our checks?
UCB has a trailing twelve-month payout ratio of 29%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 25% which, assuming the share price stays the same, leads to a dividend yield of 1.9%. Moreover, EPS is also forecasted to fall to €4.01 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
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.
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. UCB has increased its DPS from €0.92 to €1.21 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, UCB generates a yield of 1.7%, which is on the low-side for Pharmaceuticals stocks.
With these dividend metrics in mind, I definitely rank UCB as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for UCB’s future growth? Take a look at our free research report of analyst consensus for UCB’s outlook.
- Valuation: What is UCB 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 UCB 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 firstname.lastname@example.org. 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.