Yahoo Finance Is ALS Limited (ASX:ALQ) A Smart Choice For Dividend Investors?
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, ALS Limited (ASX:ALQ) has paid a dividend to shareholders. It currently yields 2.9%. Let's dig deeper into whether ALS should have a place in your portfolio.
Check out our latest analysis for ALS
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
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?
Can it afford to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
Does ALS pass our checks?
The company currently pays out 66% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect ALQ's payout to fall to 53% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.1%. However, EPS should increase to A$0.38, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. 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. Not only have dividend payouts from ALS fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, ALS has a yield of 2.9%, which is on the low-side for Professional Services stocks.
Next Steps:
Taking all the above into account, ALS is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 key factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for ALQ’s future growth? Take a look at our free research report of analyst consensus for ALQ’s outlook.
Valuation: What is ALQ 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 ALQ is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
