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Important news for shareholders and potential investors in Smartgroup Corporation Ltd (ASX:SIQ): The dividend payment of A$0.19 per share will be distributed into shareholder on 29 March 2018, and the stock will begin trading ex-dividend at an earlier date, 14 March 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Smartgroup’s latest financial data to analyse its dividend attributes. View our latest analysis for Smartgroup
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does Smartgroup fare?
Smartgroup has a trailing twelve-month payout ratio of 101.34%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 66.28%, leading to a dividend yield of around 4.16%. Furthermore, EPS should increase to A$0.53, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Smartgroup as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Smartgroup produces a yield of 3.40%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Smartgroup 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, 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. I’ve put together three important aspects you should further research: