Investors who want to cash in on Vesuvius plc's (LON:VSVS) upcoming dividend of UK£0.14 per share have only 3 days left to buy the shares before its ex-dividend date, 18 April 2019, in time for dividends payable on the 24 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Vesuvius's latest financial data to analyse its dividend characteristics.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- 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 is able 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?
How does Vesuvius fare?
The current trailing twelve-month payout ratio for the stock is 39%, which means that the dividend is covered by earnings. Going forward, analysts expect VSVS's payout to remain around the same level at 41% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.6%. Furthermore, EPS is forecasted to fall to £0.47 in the upcoming year.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. The reality is that it is too early to consider Vesuvius as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Vesuvius generates a yield of 3.1%, which is high for Machinery stocks but still below the market's top dividend payers.
Taking all the above into account, Vesuvius is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for VSVS’s future growth? Take a look at our free research report of analyst consensus for VSVS’s outlook.
- Valuation: What is VSVS 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 VSVS 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.
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.