Investors who want to cash in on Silverlake Axis Ltd’s (SGX:5CP) upcoming dividend of RM0.008 per share have only 4 days left to buy the shares before its ex-dividend date, 01 November 2018, in time for dividends payable on the 16 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Silverlake Axis’s latest financial data to analyse its dividend attributes.
View our latest analysis for Silverlake Axis
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 it paid dividend every year without dramatically reducing payout in the past?
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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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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Silverlake Axis fare?
Silverlake Axis has a trailing twelve-month payout ratio of 70%, which means that the dividend is covered by earnings. Going forward, analysts expect 5CP’s payout to remain around the same level at 73% of its earnings, which leads to a dividend yield of around 5.7%. Furthermore, EPS should increase to MYR0.078.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Although 5CP’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Silverlake Axis has a yield of 7.2%, which is high for Software stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Silverlake Axis is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. There are three key aspects you should further research:
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Future Outlook: What are well-informed industry analysts predicting for 5CP’s future growth? Take a look at our free research report of analyst consensus for 5CP’s outlook.
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Valuation: What is 5CP 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 5CP 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.