If you are interested in cashing in on Grainger plc’s (LSE:GRI) upcoming dividend of £0.03 per share, you only have 3 days left to buy the shares before its ex-dividend date, 28 December 2017, in time for dividends payable on the 09 February 2018. Is this future income a persuasive enough catalyst for investors to think about Grainger 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. Check out our latest analysis for Grainger
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is its annual yield among the top 25% of dividend-paying companies?
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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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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Grainger pass our checks?
The company currently pays out 27.48% of its earnings as a dividend, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 51.76%, leading to a dividend yield of around 2.20%. However, EPS is forecasted to fall to £0.17 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from Grainger fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, Grainger has a yield of 1.69%, which is on the low-side for real estate stocks.
What this means for you:
Are you a shareholder? Investors may not have the best feeling about their investment in Grainger right now, in terms of its dividend attributes. It may be beneficial exploring other income stocks as alternatives to Grainger or even look at high-growth stocks to complement your steady income stocks. I encourage you to continue your research by taking a look at my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? Now you know to keep in mind the reason why investors should be careful investing in Grainger for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. As always, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Check our latest free fundmental analysis to explore other aspects of Grainger.
To help readers see pass 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.