If you are interested in cashing in on ZPG Plc’s (LSE:ZPG) upcoming dividend of £0.04 per share, you only have 3 days left to buy the shares before its ex-dividend date, 07 December 2017, in time for dividends payable on the 08 February 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into ZPG’s latest financial data to analyse its dividend attributes. Check out our latest analysis for ZPG
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 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 it increased its dividend per share amount over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
How does ZPG fare?
The current payout ratio for the stock is 65.03%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 38.77%, leading to a dividend yield of 2.43%. However, EPS should increase to £0.11, 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. The reality is that it is too early to consider ZPG as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, ZPG has a yield of 1.72%, which is on the low-side for internet software and services stocks.
What this means for you:
Are you a shareholder? Investors may not have the best feeling about their investment in ZPG right now, in terms of its dividend attributes. It may be beneficial exploring other income stocks as alternatives to ZPG or even look at high-growth stocks to complement your steady income stocks. I recommend continuing your research by exploring my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? After digging a little deeper into ZPG’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, ZPG could still be offering some interesting investment opportunities. As with all investments, 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. Dig deeper in our latest free fundmental analysis to explore other aspects of ZPG.
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.