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4 Days Left Until carsalescom Ltd (ASX:CAR) Trades Ex-Dividend,

Have you been keeping an eye on carsalescom Ltd’s (ASX:CAR) upcoming dividend of AU$0.24 per share payable on the 10 October 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 24 September 2018. Should you diversify into carsales.com and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

Check out our latest analysis for carsales.com

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?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Is is able to pay the current rate of dividends from its earnings?

  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

ASX:CAR Historical Dividend Yield September 19th 18
ASX:CAR Historical Dividend Yield September 19th 18

Does carsales.com pass our checks?

carsales.com has a trailing twelve-month payout ratio of 58.0%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 80.2%, leading to a dividend yield of around 3.5%. However, EPS is forecasted to fall to A$0.59 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view carsales.com as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, carsales.com has a yield of 2.9%, which is high for Internet stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then carsales.com is a complicated choice since it has some positive aspects as well as negative ones. 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, 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 essential factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for CAR’s future growth? Take a look at our free research report of analyst consensus for CAR’s outlook.

  2. Valuation: What is CAR 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 CAR is currently mispriced by the market.

  3. 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.