Have you been keeping an eye on Valener Inc’s (TSE:VNR) upcoming dividend of CA$0.29 per share payable on the 15 October 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 27 September 2018. Is this future income a persuasive enough catalyst for investors to think about Valener 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.
View our latest analysis for Valener
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 consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share risen in the past couple of years?
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Can it afford 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 Valener pass our checks?
The company currently pays out 102% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect VNR’s payout to fall into a more sustainable range of 85.1% of its earnings, which leads to a dividend yield of 6.3%. In addition to this, EPS should increase to CA$1.31, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Valener as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Valener has a yield of 6.0%, which is high for Gas Utilities stocks.
Next Steps:
Whilst there are few things you may like about Valener from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three pertinent aspects you should look at: