Service Stream Limited (ASX:SSM): Ex-Dividend Is In 3 Days

Attention dividend hunters! Service Stream Limited (ASX:SSM) will be distributing its dividend of AU$0.035 per share on the 21 March 2019, and will start trading ex-dividend in 3 days time on the 06 March 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Service Stream can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.

See our latest analysis for Service Stream

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:

• Does it pay an annual yield higher than 75% of dividend payers?
• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
• Has dividend per share risen in the past couple of years?
• Is its earnings sufficient to payout dividend at the current rate?
• Will the company be able to keep paying dividend based on the future earnings growth?

How well does Service Stream fit our criteria?

Service Stream has a trailing twelve-month payout ratio of 64%, which means that the dividend is covered by earnings. Going forward, analysts expect SSM's payout to remain around the same level at 61% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.5%. Moreover, EPS should increase to A$0.15.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

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. Not only have dividend payouts from Service Stream fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.

Compared to its peers, Service Stream has a yield of 3.9%, which is high for Construction stocks but still below the market's top dividend payers.

Next Steps:

If you are building an income portfolio, then Service Stream is a complicated choice since it has some positive aspects as well as negative ones. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for SSM’s future growth? Take a look at our free research report of analyst consensus for SSM’s outlook.
2. Valuation: What is SSM 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 SSM is currently mispriced by the market.
3. 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 editorial-team@simplywallst.com. 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.