If you are interested in cashing in on Ashtead Group plc’s (LON:AHT) upcoming dividend of UK£0.065 per share, you only have 4 days left to buy the shares before its ex-dividend date, 17 January 2019, in time for dividends payable on the 06 February 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Ashtead Group can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
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How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How well does Ashtead Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 15%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 25% which, assuming the share price stays the same, leads to a dividend yield of 2.3%. However, EPS is forecasted to fall to £1.66 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. In the case of AHT it has increased its DPS from £0.025 to £0.33 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. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Ashtead Group generates a yield of 1.8%, which is on the low-side for Trade Distributors stocks.
Taking into account the dividend metrics, Ashtead Group ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 relevant factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for AHT’s future growth? Take a look at our free research report of analyst consensus for AHT’s outlook.
- Valuation: What is AHT 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 AHT 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 email@example.com.