5 Checks you should do on a Dividend Stock
Whenever I am looking at a potential dividend stock investment, I always check these 5 metrics:
- Annual yield among the top 25% of dividend payers;
- Not missed a payment in the past 10 years, nor significantly reduced per share payout
- Dividend per share amount increased over at least 10 years
- Able to pay the current rate with their earnings
- Do I believe they can afford to keep paying based on future earnings growth?
Also, if the company has been paying a dividend for less then 10 years I don’t think the stock is time tested enough to be considered a ‘pure dividend stock’. Rather I would include the dividend as part of a wider investment thesis. See our latest analysis for OCN
How does Ocean Wilsons Holdings fare?
Ocean Wilsons Holdings has a payout ratio of 49%, which means that the dividend is covered by earnings. In 3 years time the analysts are predicting dividends per share to be around $0.711 and EPS to increase to $1.39. This means they should be able to continue the dividend payout with an estimated future payout ratio of 51%.
If the dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable. Whilst their per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the DPS (dividends per share) in some years although it has so far always picked up again.
Therefore everything is looking good for Ocean Wilsons Holdings with its attractive yield of 4.75%, which is high for a transportation stock.
The Take Away
Taking that into account, Ocean Wilsons Holdings ticks most of the boxes as a strong dividend investment. Just remember there are also other solid payers out there. Despite the above criteria being relatively basic, it’s important that potential dividend stocks be checked against them, as they are fundamental checks for any serious income investor. On top of this, you should also be confident about the company’s core business and fundamentals.
No matter how great a company is, it is not worth an infite price. Is Ocean Wilsons Holdings overvalued or is it actually available for a good price? I recommend you check our latest FREE analysis to find out! If you are not interested in OCN anymore check out my list of “Dividend Rock Stars” to see stocks that meet all the checks above.