On the 02 April 2019, Owens Corning (NYSE:OC) will be paying shareholders an upcoming dividend amount of US$0.22 per share. However, investors must have bought the company’s stock before 07 March 2019 in order to qualify for the payment. That means you have only 4 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Owens Corning can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount 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?
How well does Owens Corning fit our criteria?
Owens Corning has a trailing twelve-month payout ratio of 17%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 14% which, assuming the share price stays the same, leads to a dividend yield of 1.8%. However, EPS should increase to $4.95, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. The reality is that it is too early to consider Owens Corning as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Owens Corning generates a yield of 1.8%, which is on the low-side for Building stocks.
If Owens Corning is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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. I’ve put together three essential factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for OC’s future growth? Take a look at our free research report of analyst consensus for OC’s outlook.
- Valuation: What is OC 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 OC 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.