On the 15 December 2017, Office Depot Inc (NASDAQ:ODP) will be paying shareholders an upcoming dividend amount of $0.03 per share. However, investors must have bought the company’s stock before 22 November 2017 in order to qualify for the payment. That means you have only 3 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding ODP can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes. See our latest analysis for ODP
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able 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?
How does Office Depot fare?
The current payout ratio for the stock is 20.72%, which means that the dividend is covered by earnings. Going forward, analysts expect ODP’s payout to increase to 26.73% of its earnings, which leads to a dividend yield of 3.05%. However, EPS is forecasted to fall to $0.4 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. 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. The reality is that it is too early to consider Office Depot as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record. Relative to peers, ODP has a yield of 3.05%, which is high for specialty retail stocks but still below the market’s top dividend payers.
What this means for you:
Are you a shareholder? Whilst there are few things you may like about Office Depot from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. It may be beneficial exploring other income stocks as alternatives to ODP or even look at high-growth stocks to supplement your steady income stocks. I recommend continuing your research by taking a look at my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.
Are you a potential investor? Taking all the above into account, Office Depot 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, ODP could still offer some interesting investment opportunities. As always, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Take a look at our latest free fundmental analysis to explore other aspects of ODP.
To help readers see pass 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.