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Investors who want to cash in on Adairs Limited’s (ASX:ADH) upcoming dividend of AU$0.08 per share have only 4 days left to buy the shares before its ex-dividend date, 11 September 2018, in time for dividends payable on the 26 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Adairs’s latest financial data to analyse its dividend characteristics.
Check out our latest analysis for Adairs
5 checks you should use to assess 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 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 dividend per share amount increased 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?
How well does Adairs fit our criteria?
The current trailing twelve-month payout ratio for the stock is 73.3%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ADH’s payout to remain around the same level at 71.3% of its earnings, which leads to a dividend yield of 7.0%. Furthermore, EPS should increase to A$0.21.
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 Adairs 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, Adairs generates a yield of 6.6%, which is high for Specialty Retail stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Adairs as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. I’ve put together three fundamental factors you should look at:
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Future Outlook: What are well-informed industry analysts predicting for ADH’s future growth? Take a look at our free research report of analyst consensus for ADH’s outlook.
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Valuation: What is ADH 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 ADH is currently mispriced by the market.
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Other 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.