Is Buying SpeedCast International Limited (ASX:SDA) For Its Upcoming US$0.024 Dividend A Good Choice?

Luis Baughman
Updated

If you are interested in cashing in on SpeedCast International Limited’s (ASX:SDA) upcoming dividend of US$0.024 per share, you only have 3 days left to buy the shares before its ex-dividend date, 07 September 2018, in time for dividends payable on the 12 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine SpeedCast International’s latest financial data to analyse its dividend characteristics.

Check out our latest analysis for SpeedCast International

5 checks you should do on a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • 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 it increased its dividend per share amount 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?

ASX:SDA Historical Dividend Yield September 3rd 18
ASX:SDA Historical Dividend Yield September 3rd 18

How well does SpeedCast International fit our criteria?

The company currently pays out 117% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect SDA’s payout to fall into a more sustainable range of 27.7% of its earnings, which leads to a dividend yield of around 2.8%. Furthermore, EPS should increase to $0.18, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider SpeedCast International as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, SpeedCast International generates a yield of 1.7%, which is on the low-side for Telecom stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in SpeedCast International for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 pertinent factors you should further research:

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

  2. Valuation: What is SDA 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 SDA 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.