If you are interested in cashing in on New Hope Corporation Limited’s (ASX:NHC) upcoming dividend of AU$0.08 per share, you only have 4 days left to buy the shares before its ex-dividend date, 18 April 2019, in time for dividends payable on the 07 May 2019. Should you diversify into New Hope and boost your portfolio income stream? Well, keep on reading because today, 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 researching a dividend stock, I always follow the following screening criteria:
- 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 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 New Hope fare?
The current trailing twelve-month payout ratio for the stock is 89%, which means that the dividend is covered by earnings. However, going forward, analysts expect NHC’s payout to fall to 32% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.9%. However, EPS should increase to A$0.37, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Although NHC’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, New Hope produces a yield of 5.7%, which is high for Oil and Gas stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, New Hope 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. Below, I’ve compiled three relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NHC’s future growth? Take a look at our free research report of analyst consensus for NHC’s outlook.
- Valuation: What is NHC 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 NHC 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 email@example.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.