Investors who want to cash in on Stuart Olson Inc’s (TSE:SOX) upcoming dividend of CA$0.12 per share have only 4 days left to buy the shares before its ex-dividend date, 27 September 2018, in time for dividends payable on the 16 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Stuart Olson’s latest financial data to analyse its dividend characteristics.
See our latest analysis for Stuart Olson
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 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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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How well does Stuart Olson fit our criteria?
Stuart Olson has a trailing twelve-month payout ratio of 110%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 74.8%, leading to a dividend yield of 8.2%. Moreover, EPS should increase to CA$0.46, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Stuart Olson 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.
Compared to its peers, Stuart Olson generates a yield of 8.2%, which is high for Construction stocks.
Next Steps:
If Stuart Olson is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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. There are three pertinent aspects you should further examine: