Shares of Sandfire Resources NL (ASX:SFR) will begin trading ex-dividend in 3 days. To qualify for the dividend check of AU$0.07 per share, investors must have owned the shares prior to 04 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. What does this mean for current shareholders and potential investors? Below, I will explain how holding Sandfire Resources can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Sandfire Resources fare?
Sandfire Resources has a trailing twelve-month payout ratio of 37%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SFR’s payout to remain around the same level at 34% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.5%. Furthermore, EPS should increase to A$0.92.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 Sandfire Resources 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, Sandfire Resources generates a yield of 3.6%, which is on the low-side for Metals and Mining stocks.
Whilst there are few things you may like about Sandfire Resources 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, 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 pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SFR’s future growth? Take a look at our free research report of analyst consensus for SFR’s outlook.
- Valuation: What is SFR 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 SFR is currently mispriced by the market.
- 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.