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Important news for shareholders and potential investors in Sheng Siong Group Ltd (SGX:OV8): The dividend payment of S$0.018 per share will be distributed to shareholders on 17 May 2019, and the stock will begin trading ex-dividend at an earlier date, 06 May 2019. Should you diversify into Sheng Siong 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.
See our latest analysis for Sheng Siong Group
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does Sheng Siong Group pass our checks?
The company currently pays out 71% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 73% which, assuming the share price stays the same, leads to a dividend yield of 3.7%. Moreover, EPS should increase to SGD0.052.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Sheng Siong Group as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Sheng Siong Group produces a yield of 3.3%, which is high for Consumer Retailing stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, Sheng Siong Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for OV8’s future growth? Take a look at our free research report of analyst consensus for OV8’s outlook.
- Valuation: What is OV8 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 OV8 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 editorial-team@simplywallst.com. 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.