Have you been keeping an eye on Galliford Try plc’s (LON:GFRD) upcoming dividend of UK£0.49 per share payable on the 05 December 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 08 November 2018. Is this future income a persuasive enough catalyst for investors to think about Galliford Try as an investment today? Below, 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 Galliford Try

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share amount increased 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?

Does Galliford Try pass our checks?

The company currently pays out 64% 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 50%, leading to a dividend yield of around 8.5%. However, EPS should increase to £1.37, 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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Galliford Try generates a yield of 8.6%, which is high for Construction stocks.

Next Steps:

With this in mind, I definitely rank Galliford Try as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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 essential factors you should further research: