Shares of UCB SA (EBR:UCB) will begin trading ex-dividend in 3 days. To qualify for the dividend check of €0.85 per share, investors must have owned the shares prior to 26 April 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. 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 UCB’s most recent financial data to examine its dividend characteristics in more detail.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does UCB pass our checks?
The current trailing twelve-month payout ratio for the stock is 29%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 25% which, assuming the share price stays the same, leads to a dividend yield of around 1.9%. In addition to this, EPS is also forecasted to fall to €4.01 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. UCB has increased its DPS from €0.92 to €1.21 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes UCB a true dividend rockstar.
In terms of its peers, UCB has a yield of 1.7%, which is on the low-side for Pharmaceuticals stocks.
With this in mind, I definitely rank UCB as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for UCB’s future growth? Take a look at our free research report of analyst consensus for UCB’s outlook.
- Valuation: What is UCB 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 UCB 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.