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Shares of StarHub Ltd (SGX:CC3) will begin trading ex-dividend in 2 days. To qualify for the dividend check of SGD0.04 per share, investors must have owned the shares prior to 09 May 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine StarHub’s latest financial data to analyse its dividend characteristics. See our latest analysis for StarHub
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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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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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does StarHub fit our criteria?
The current trailing twelve-month payout ratio for CC3 is 118.28%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a payout ratio of 123.52%, leading to a dividend yield of 6.62%. In addition to this, EPS is forecasted to fall to SGD0.13 in the upcoming year. 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. The reality facing CC3 investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time. Relative to peers, StarHub has a yield of 6.99%, which is high for Wireless Telecom stocks.
Next Steps:
If StarHub is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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. There are three essential factors you should look at: