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Investors who want to cash in on Service Stream Limited’s (ASX:SSM) upcoming dividend of AU$0.045 per share have only 4 days left to buy the shares before its ex-dividend date, 12 September 2018, in time for dividends payable on the 27 September 2018. Should you diversify into Service Stream 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.
Check out our latest analysis for Service Stream
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is it paying an annual yield above 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How well does Service Stream fit our criteria?
Service Stream has a trailing twelve-month payout ratio of 62.2%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SSM’s payout to remain around the same level at 64.2% of its earnings, which leads to a dividend yield of around 5.1%. In addition to this, EPS should increase to A$0.12.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although SSM’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Service Stream has a yield of 5.2%, which is high for Construction stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Service Stream 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 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 pertinent factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for SSM’s future growth? Take a look at our free research report of analyst consensus for SSM’s outlook.
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Valuation: What is SSM 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 SSM is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.