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Shares of Sonoco Products Company (NYSE:SON) will begin trading ex-dividend in 2 days. To qualify for the dividend check of US$0.43 per share, investors must have owned the shares prior to 09 May 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Sonoco Products as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five 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 it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Sonoco Products fit our criteria?
Sonoco Products has a trailing twelve-month payout ratio of 53%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 49% which, assuming the share price stays the same, leads to a dividend yield of 2.8%. Furthermore, EPS should increase to $3.46.
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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of SON it has increased its DPS from $1.08 to $1.72 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes SON a true dividend rockstar.
Relative to peers, Sonoco Products produces a yield of 2.7%, which is high for Packaging stocks but still below the market’s top dividend payers.
With these dividend metrics in mind, I definitely rank Sonoco Products as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SON’s future growth? Take a look at our free research report of analyst consensus for SON’s outlook.
- Valuation: What is SON 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 SON 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.