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Have you been keeping an eye on Playtech plc’s (LON:PTEC) upcoming dividend of €0.12 per share payable on the 23 October 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 20 September 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 Playtech’s most recent financial data to examine its dividend characteristics in more detail.
See our latest analysis for Playtech
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it the top 25% annual dividend yield payer?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has it increased its dividend per share amount over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How does Playtech fare?
Playtech has a trailing twelve-month payout ratio of 41.8%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 55.0%, leading to a dividend yield of 7.2%. However, EPS is forecasted to fall to €0.66 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. Although PTEC’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.
Relative to peers, Playtech has a yield of 6.1%, which is high for Hospitality stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Playtech is definitely worth considering for investors looking to build a dedicated income 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 pertinent factors you should look at: