Should Income Investors Buy OZ Minerals Limited (ASX:OZL) Before Its Ex-Dividend?

Attention dividend hunters! OZ Minerals Limited (ASX:OZL) will be distributing its dividend of AU$0.08 per share on the 17 September 2018, and will start trading ex-dividend in 2 days time on the 31 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine OZ Minerals’s latest financial data to analyse its dividend characteristics.

See our latest analysis for OZ Minerals

Here’s how I find good dividend stocks

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• 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 the amount of dividend per share grown over the past?

• 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?

ASX:OZL Historical Dividend Yield August 28th 18

Does OZ Minerals pass our checks?

The current trailing twelve-month payout ratio for the stock is 23.6%, which means that the dividend is covered by earnings. Going forward, analysts expect OZL’s payout to increase to 31.1% of its earnings, which leads to a dividend yield of 2.2%. However, EPS is forecasted to fall to A$0.62 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from OZ Minerals have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.

In terms of its peers, OZ Minerals produces a yield of 2.3%, which is on the low-side for Metals and Mining stocks.

Next Steps:

Taking all the above into account, OZ Minerals is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important aspects you should look at:

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

2. Valuation: What is OZL 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 OZL 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.