Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. The SimplyBiz Group plc (LON:SBIZ) has returned an average dividend yield of 6.00% annually to shareholders. Let’s dig deeper into whether SimplyBiz Group should have a place in your portfolio.
View our latest analysis for SimplyBiz Group
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown 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 SimplyBiz Group pass our checks?
The company currently pays out 22.47% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SBIZ’s payout to increase to 33.33% of its earnings, which leads to a dividend yield of 2.10%.
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. Unfortunately, it is really too early to view SimplyBiz Group as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether SBIZ one as a stable dividend player.
Compared to its peers, SimplyBiz Group produces a yield of 5.57%, which is high for Professional Services stocks.
Next Steps:
Considering the dividend attributes we analyzed above, SimplyBiz Group is definitely worth keeping an eye on for someone looking to build a dedicated income 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 aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SBIZ’s future growth? Take a look at our free research report of analyst consensus for SBIZ’s outlook.
- Valuation: What is SBIZ 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 SBIZ 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.