If you are interested in cashing in on Smiths Group plc’s (LON:SMIN) upcoming dividend of UK£0.14 per share, you only have 4 days left to buy the shares before its ex-dividend date, 04 April 2019, in time for dividends payable on the 26 April 2019. Should you diversify into Smiths Group 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 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Smiths Group fare?
The current trailing twelve-month payout ratio for the stock is 61%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect SMIN’s payout to fall to 48% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.4%. However, EPS should increase to £0.93, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. SMIN has increased its DPS from £0.34 to £0.45 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Smiths Group generates a yield of 3.1%, which is high for Industrials stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Smiths Group 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, 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SMIN’s future growth? Take a look at our free research report of analyst consensus for SMIN’s outlook.
- Valuation: What is SMIN 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 SMIN 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.