Attention dividend hunters! Phibro Animal Health Corporation (NASDAQ:PAHC) will be distributing its dividend of US$0.12 per share on the 27 March 2019, and will start trading ex-dividend in 4 days time on the 05 March 2019. Should you diversify into Phibro Animal Health 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.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- 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?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Phibro Animal Health pass our checks?
The current trailing twelve-month payout ratio for the stock is 23%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 27% which, assuming the share price stays the same, leads to a dividend yield of around 1.8%. However, EPS is forecasted to fall to $1.6 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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Phibro Animal Health 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.
Relative to peers, Phibro Animal Health produces a yield of 1.6%, which is on the low-side for Pharmaceuticals stocks.
If Phibro Animal Health is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PAHC’s future growth? Take a look at our free research report of analyst consensus for PAHC’s outlook.
- Valuation: What is PAHC 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 PAHC 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 email@example.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.