Shares of DWS Limited (ASX:DWS) will begin trading ex-dividend in 2 days. To qualify for the dividend check of AU$0.05 per share, investors must have owned the shares prior to 03 September 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine DWS’s latest financial data to analyse its dividend characteristics.
See our latest analysis for DWS
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five 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 the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does DWS fare?
The company currently pays out 82.8% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 70.8%, leading to a dividend yield of 7.6%. However, EPS should increase to A$0.14, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from DWS have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, DWS has a yield of 7.2%, which is high for IT stocks.
Next Steps:
Keeping in mind the dividend characteristics above, DWS is definitely worth considering for investors looking to build a dedicated income portfolio. 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. Below, I’ve compiled three fundamental aspects you should look at:
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Future Outlook: What are well-informed industry analysts predicting for DWS’s future growth? Take a look at our free research report of analyst consensus for DWS’s outlook.
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Valuation: What is DWS 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 DWS 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.