Have you been keeping an eye on Warpaint London PLC’s (LON:W7L) upcoming dividend of UK£0.015 per share payable on the 16 November 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 01 November 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Warpaint London’s most recent financial data to examine its dividend characteristics in more detail.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- 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 risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Warpaint London fit our criteria?
Warpaint London has a trailing twelve-month payout ratio of 70%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect W7L’s payout to fall to 40% of its earnings, which leads to a dividend yield of 3.2%. However, EPS should increase to £0.12, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Warpaint London as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether W7L one as a stable dividend player.
Relative to peers, Warpaint London has a yield of 2.5%, which is on the low-side for Personal Products stocks.
If you are building an income portfolio, then Warpaint London is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. There are three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for W7L’s future growth? Take a look at our free research report of analyst consensus for W7L’s outlook.
- Historical Performance: What has W7L’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 firstname.lastname@example.org.