Yahoo Finance 4 Days Left Until Downer EDI Limited (ASX:DOW) Trades Ex-Dividend
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Important news for shareholders and potential investors in Downer EDI Limited (ASX:DOW): The dividend payment of AU$0.14 per share will be distributed to shareholders on 21 March 2019, and the stock will begin trading ex-dividend at an earlier date, 20 February 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Downer EDI’s latest financial data to analyse its dividend attributes.
See our latest analysis for Downer EDI
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
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?
How does Downer EDI fare?
The company currently pays out 79% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 58% which, assuming the share price stays the same, leads to a dividend yield of 4.3%. However, EPS should increase to A$0.51, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. DOW has increased its DPS from A$0.26 to A$0.28 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes DOW a true dividend rockstar.
In terms of its peers, Downer EDI produces a yield of 3.7%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, Downer EDI is definitely worth considering for investors 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 pertinent factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for DOW’s future growth? Take a look at our free research report of analyst consensus for DOW’s outlook.
Valuation: What is DOW 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 DOW is currently mispriced by the market.
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.
