2 Days Left Before Dignity plc (LON:DTY) Will Be Trading Ex-Dividend,

Attention dividend hunters! Dignity plc (LON:DTY) will be distributing its dividend of UK£0.086 per share on the 26 October 2018, and will start trading ex-dividend in 2 days time on the 20 September 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Dignity’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for Dignity

5 questions to ask before buying a dividend stock

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

• Is their annual yield among the top 25% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Can it afford 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?

LSE:DTY Historical Dividend Yield September 17th 18

How does Dignity fare?

The current trailing twelve-month payout ratio for the stock is 23.3%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 33.4%, leading to a dividend yield of around 2.5%. However, EPS is forecasted to fall to £0.74 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Dignity produces a yield of 2.5%, which is high for Consumer Services stocks but still below the market’s top dividend payers.

Next Steps:

Keeping in mind the dividend characteristics above, Dignity is definitely worth considering for investors looking to build a dedicated income portfolio. 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. I’ve put together three relevant factors you should further examine:

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

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

3. 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.