Smartgroup Corporation Ltd (ASX:SIQ): 4 Days To Buy Before The Ex-Dividend Date

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On the 15 March 2019, Smartgroup Corporation Ltd (ASX:SIQ) will be paying shareholders an upcoming dividend amount of AU$0.21 per share. However, investors must have bought the company's stock before 28 February 2019 in order to qualify for the payment. That means you have only 4 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let's take a look at Smartgroup's most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for Smartgroup

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?
• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
• Has it increased its dividend per share amount over the past?
• Does earnings amply cover its dividend payments?
• Will it have the ability to keep paying its dividends going forward?

How does Smartgroup fare?

Smartgroup has a trailing twelve-month payout ratio of 89%, which means that the dividend is covered by earnings. However, going forward, analysts expect SIQ's payout to fall to 67% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.3%. However, EPS should increase to A$0.54, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Smartgroup as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Smartgroup produces a yield of 4.8%, which is high for Commercial Services stocks but still below the market's top dividend payers.

Next Steps:

Whilst there are few things you may like about Smartgroup 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. There are three relevant aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for SIQ’s future growth? Take a look at our free research report of analyst consensus for SIQ’s outlook.
2. Valuation: What is SIQ 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 SIQ 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.