A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the last few years QMS Media Limited (ASX:QMS) has paid a dividend to shareholders. Today it yields 2.4%. Should it have a place in your portfolio? Let’s take a look at QMS Media in more detail.
Check out our latest analysis for QMS Media
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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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 amount increased over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
How well does QMS Media fit our criteria?
The company currently pays out 39% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 33%, leading to a dividend yield of around 3.7%.
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 is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider QMS Media 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.
In terms of its peers, QMS Media generates a yield of 2.4%, which is on the low-side for Media stocks.
Next Steps:
After digging a little deeper into QMS Media’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. There are three important aspects you should further research:
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Future Outlook: What are well-informed industry analysts predicting for QMS’s future growth? Take a look at our free research report of analyst consensus for QMS’s outlook.
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Valuation: What is QMS 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 QMS is currently mispriced by the market.
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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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.