Have you been keeping an eye on Wm Morrison Supermarkets PLC’s (LON:MRW) upcoming dividend of UK£0.038 per share payable on the 05 November 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 27 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Wm Morrison Supermarkets’s latest financial data to analyse its dividend characteristics.
View our latest analysis for Wm Morrison Supermarkets
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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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 Wm Morrison Supermarkets fit our criteria?
The current trailing twelve-month payout ratio for the stock is 60.5%, which means that the dividend is covered by earnings. Going forward, analysts expect MRW’s payout to remain around the same level at 64.3% of its earnings, which leads to a dividend yield of 3.8%. In addition to this, EPS should increase to £0.13.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Wm Morrison Supermarkets has a yield of 3.2%, which is on the low-side for Consumer Retailing stocks.
Next Steps:
Taking into account the dividend metrics, Wm Morrison Supermarkets ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential aspects you should look at:
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Future Outlook: What are well-informed industry analysts predicting for MRW’s future growth? Take a look at our free research report of analyst consensus for MRW’s outlook.
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Valuation: What is MRW 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 MRW 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.