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Attention dividend hunters! Midwich Group Plc (LON:MIDW) will be distributing its dividend of UK£0.046 per share on the 26 October 2018, and will start trading ex-dividend in 2 days time on the 20 September 2018. Is this future income a persuasive enough catalyst for investors to think about Midwich Group 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.
View our latest analysis for Midwich Group
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is it paying an annual yield above 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown 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 Midwich Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 66.8%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 55.9%, leading to a dividend yield of 2.5%. Furthermore, EPS is also forecasted to fall to £0.21 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 Midwich Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Midwich Group generates a yield of 2.1%, which is high for Electronic stocks but still below the market’s top dividend payers.
Next Steps:
If Midwich Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three essential factors you should look at: