SSE plc (LSE:SSE) has pleased shareholders over the past 10 years, paying out an average dividend of 6.00% annually. The company currently pays out a dividend yield of 7.23% to shareholders, making it a relatively attractive dividend stock. Does SSE tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for SSE
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does SSE fare?
The company currently pays out 68.23% 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 SSE’s payout to increase to 76.92% of its earnings, which leads to a dividend yield of around 7.56%. However, EPS is forecasted to fall to £1.22 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of SSE it has increased its DPS from £0.58 to £0.92 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. In terms of its peers, SSE generates a yield of 7.23%, which is high for Electric Utilities stocks.
With this in mind, I definitely rank SSE 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. I’ve put together three important aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SSE’s future growth? Take a look at our free research report of analyst consensus for SSE’s outlook.
- Valuation: What is SSE 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 SSE 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.