Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Solex Energy Limited (NSE:SOLEX) has started paying a dividend to shareholders. It currently trades on a yield of 3.4%. Does Solex Energy tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Solex Energy
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
-
Is it the top 25% annual dividend yield payer?
-
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
-
Has the amount of dividend per share grown over the past?
-
Does earnings amply cover its dividend payments?
-
Will it have the ability to keep paying its dividends going forward?
How does Solex Energy fare?
The current trailing twelve-month payout ratio for the stock is 16%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Solex Energy as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
Relative to peers, Solex Energy has a yield of 3.4%, which is high for Semiconductor stocks.
Next Steps:
Whilst there are few things you may like about Solex Energy from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 pertinent aspects you should look at: