Attention dividend hunters! GUD Holdings Limited (ASX:GUD) will be distributing its dividend of AU$0.28 per share on the 31 August 2018, and will start trading ex-dividend in 2 days time on the 16 August 2018. Is this future income a persuasive enough catalyst for investors to think about GUD Holdings 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.
See our latest analysis for GUD Holdings
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is it the top 25% annual dividend yield payer?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does GUD Holdings pass our checks?
The company currently pays out 88.76% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 79.25%, leading to a dividend yield of 4.21%. However, EPS should increase to A$0.73, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. Not only have dividend payouts from GUD Holdings fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, GUD Holdings has a yield of 3.44%, which is high for Auto Components stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, GUD Holdings is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 key factors you should look at:
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Future Outlook: What are well-informed industry analysts predicting for GUD’s future growth? Take a look at our free research report of analyst consensus for GUD’s outlook.
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Valuation: What is GUD 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 GUD is currently mispriced by the market.
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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.