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Important news for shareholders and potential investors in MyState Limited (ASX:MYS): The dividend payment of AU$0.14 per share will be distributed to shareholders on 29 March 2019, and the stock will begin trading ex-dividend at an earlier date, 01 March 2019. Is this future income a persuasive enough catalyst for investors to think about MyState 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.
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does MyState fit our criteria?
The company currently pays out 86% 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 a payout ratio of 86% which, assuming the share price stays the same, leads to a dividend yield of around 6.5%. In addition to this, EPS should increase to A$0.34.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider MyState as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, MyState produces a yield of 6.2%, which is high for Mortgage stocks.
Keeping in mind the dividend characteristics above, MyState is definitely worth considering for investors looking to build a dedicated income 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 pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MYS’s future growth? Take a look at our free research report of analyst consensus for MYS’s outlook.
- Valuation: What is MYS 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 MYS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.