Yahoo Finance

Important news for shareholders and potential investors in Spirent Communications plc (LON:SPT): The dividend payment of US$0.021 per share will be distributed to shareholders on 03 May 2019, and the stock will begin trading ex-dividend at an earlier date, 14 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Spirent Communications’s latest financial data to analyse its dividend characteristics.

View our latest analysis for Spirent Communications

Here’s how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is their annual yield among the top 25% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

How well does Spirent Communications fit our criteria?

Spirent Communications has a trailing twelve-month payout ratio of 49%, which means that the dividend is covered by earnings. However, going forward, analysts expect SPT’s payout to fall to 37% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.5%. However, EPS should increase to $0.11, 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 SPT’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, Spirent Communications produces a yield of 2.3%, which is on the low-side for Communications stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Spirent Communications is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. I’ve put together three key factors you should further examine: