Yahoo Finance Should You Buy Swallowfield plc (LON:SWL) For Its 1.7% Dividend?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Swallowfield plc (LON:SWL) has been paying a dividend to shareholders. Today it yields 1.7%. Let’s dig deeper into whether Swallowfield should have a place in your portfolio.
Check out our latest analysis for Swallowfield
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
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?
How well does Swallowfield fit our criteria?
Swallowfield has a trailing twelve-month payout ratio of 29.6%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 26.7%, leading to a dividend yield of 2.4%.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Swallowfield fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, Swallowfield has a yield of 1.7%, which is on the low-side for Personal Products stocks.
Next Steps:
After digging a little deeper into Swallowfield’s yield, it’s easy to see why you should be cautious investing in the company just 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. I’ve put together three pertinent aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for SWL’s future growth? Take a look at our free research report of analyst consensus for SWL’s outlook.
Valuation: What is SWL 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 SWL is currently mispriced by the market.
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.
