On the 29 March 2019, Steven Madden, Ltd. (NASDAQ:SHOO) will be paying shareholders an upcoming dividend amount of US$0.14 per share. However, investors must have bought the company’s stock before 18 March 2019 in order to qualify for the payment. That means you have only 4 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Steven Madden’s most recent financial data to examine its dividend characteristics in more detail.
5 questions to ask before buying 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 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?
- Is is able 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 does Steven Madden fare?
Steven Madden has a trailing twelve-month payout ratio of 34%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 26% which, assuming the share price stays the same, leads to a dividend yield of 1.9%. However, EPS should increase to $1.83, 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. 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 Steven Madden as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether SHOO one as a stable dividend player.
In terms of its peers, Steven Madden produces a yield of 1.7%, which is high for Luxury stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about Steven Madden from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. There are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SHOO’s future growth? Take a look at our free research report of analyst consensus for SHOO’s outlook.
- Valuation: What is SHOO 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 SHOO 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.