Shares of SBM Offshore N.V. (AMS:SBMO) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.37 per share, investors must have owned the shares prior to 12 April 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Should you diversify into SBM Offshore 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
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does SBM Offshore pass our checks?
SBM Offshore has a trailing twelve-month payout ratio of 36%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SBMO’s payout to increase to 47% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.0%. However, EPS is forecasted to fall to $0.72 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from SBM Offshore have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, SBM Offshore generates a yield of 1.9%, which is on the low-side for Energy Services stocks.
Now you know to keep in mind the reason why investors should be careful investing in SBM Offshore for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SBMO’s future growth? Take a look at our free research report of analyst consensus for SBMO’s outlook.
- Valuation: What is SBMO 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 SBMO 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.