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On the 11 October 2018, Macfarlane Group PLC (LON:MACF) will be paying shareholders an upcoming dividend amount of UK£0.0065 per share. However, investors must have bought the company’s stock before 20 September 2018 in order to qualify for the payment. That means you have only 2 days left! 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 Macfarlane Group’s most recent financial data to examine its dividend characteristics in more detail.
View our latest analysis for Macfarlane Group
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Macfarlane Group fit our criteria?
The company currently pays out 40.2% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect MACF’s payout to fall to 32.4% of its earnings, which leads to a dividend yield of 2.4%. However, EPS should increase to £0.058, 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. 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. Although MACF’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Macfarlane Group has a yield of 2.1%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.
Next Steps:
With this in mind, I definitely rank Macfarlane Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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 essential aspects you should further research: