Have you been keeping an eye on NFI Group Inc’s (TSE:NFI) upcoming dividend of US$0.38 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. What does this mean for current shareholders and potential investors? Below, I will explain how holding NFI Group can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Check out our latest analysis for NFI Group
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is it paying an annual yield above 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share risen in the past couple of years?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
Does NFI Group pass our checks?
The company currently pays out 35.0% 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 a payout ratio of 38.1%, leading to a dividend yield of around 2.8%. Furthermore, EPS is forecasted to fall to $2.78 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. The reality is that it is too early to consider NFI Group as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, NFI Group has a yield of 2.2%, which is on the low-side for Machinery stocks.
Next Steps:
Whilst there are few things you may like about NFI Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. Below, I’ve compiled three essential factors you should look at: