Have you been keeping an eye on Forterra plc’s (LON:FORT) upcoming dividend of UK£0.033 per share payable on the 11 October 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 20 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Forterra’s latest financial data to analyse its dividend attributes.
View our latest analysis for Forterra
5 checks you should do on 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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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share amount increased 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 Forterra fare?
The current trailing twelve-month payout ratio for the stock is 40.1%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect FORT’s payout to remain around the same level at 39.9% of its earnings, which leads to a dividend yield of around 4.2%. Furthermore, EPS should increase to £0.27.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 Forterra 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, Forterra generates a yield of 3.6%, which is high for Basic Materials stocks but still below the market’s top dividend payers.
Next Steps:
If you are building an income portfolio, then Forterra 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. Below, I’ve compiled three important aspects you should further research: