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Investors who want to cash in on Tourism Holdings Limited's (NZSE:THL) upcoming dividend of NZ$0.14 per share have only 4 days left to buy the shares before its ex-dividend date, 03 April 2019, in time for dividends payable on the 16 April 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let's take a look at Tourism Holdings's most recent financial data to examine its dividend characteristics in more detail.
View our latest analysis for Tourism Holdings
5 checks you should do on 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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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?
Does Tourism Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 58%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 83% which, assuming the share price stays the same, leads to a dividend yield of around 6.3%. However, EPS is forecasted to fall to NZ$0.29 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Tourism Holdings as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Tourism Holdings produces a yield of 5.9%, which is high for Transportation stocks.
Next Steps:
Taking into account the dividend metrics, Tourism Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I've put together three important aspects you should further examine: