Have you been keeping an eye on Sunningdale Tech Ltd’s (SGX:BHQ) upcoming dividend of S$0.05 per share payable on the 30 April 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 12 April 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Sunningdale Tech’s latest financial data to analyse its dividend attributes.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Sunningdale Tech fit our criteria?
Sunningdale Tech has a trailing twelve-month payout ratio of 51%, which means that the dividend is covered by earnings. Going forward, analysts expect BHQ’s payout to increase to 58% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.7%. However, EPS is forecasted to fall to SGD0.11 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. The reality is that it is too early to consider Sunningdale Tech as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Sunningdale Tech has a yield of 5.7%, which is high for Machinery stocks.
Keeping in mind the dividend characteristics above, Sunningdale Tech is definitely worth considering for investors looking to build a dedicated income 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. I’ve put together three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for BHQ’s future growth? Take a look at our free research report of analyst consensus for BHQ’s outlook.
- Valuation: What is BHQ 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 BHQ 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.