Attention dividend hunters! SDL plc (LSE:SDL) will be distributing its dividend of £0.06 per share on the 08 June 2018, and will start trading ex-dividend in 3 days time on the 10 May 2018. Should you diversify into SDL and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. See our latest analysis for SDL
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 its annual yield among the top 25% of dividend-paying companies?
-
Has it paid dividend every year without dramatically reducing payout in the past?
-
Has it increased its dividend per share amount over the past?
-
Is its earnings sufficient to payout dividend at the current rate?
-
Will it be able to continue to payout at the current rate in the future?
How does SDL fare?
The company currently pays out 36.82% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 27.03%, leading to a dividend yield of 1.76%. Moreover, EPS is also forecasted to fall to £0.15 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider SDL as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, SDL has a yield of 1.51%, which is on the low-side for Software stocks.
Next Steps:
After digging a little deeper into SDL’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three fundamental aspects you should look at:
-
Future Outlook: What are well-informed industry analysts predicting for SDL’s future growth? Take a look at our free research report of analyst consensus for SDL’s outlook.
-
Valuation: What is SDL 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 SDL 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.
To help readers see pass 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.