Yahoo Finance Should Dechra Pharmaceuticals PLC (LON:DPH) Be Part Of Your Income Portfolio?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Dechra Pharmaceuticals PLC (LON:DPH) has paid dividends to shareholders, and these days it yields 1.1%. Should it have a place in your portfolio? Let’s take a look at Dechra Pharmaceuticals in more detail.
View our latest analysis for Dechra Pharmaceuticals
Want to help shape the future of investing tools? Participate in a short research study and receive a subscription valued at $60.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% 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?
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 does Dechra Pharmaceuticals fare?
Dechra Pharmaceuticals has a trailing twelve-month payout ratio of 68%, which means that the dividend is covered by earnings. However, going forward, analysts expect DPH’s payout to fall to 28% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.3%. In addition to this, EPS is also forecasted to fall to £0.34 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. 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. Dividend payments from Dechra Pharmaceuticals have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. 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, Dechra Pharmaceuticals produces a yield of 1.1%, which is on the low-side for Pharmaceuticals stocks.
Next Steps:
After digging a little deeper into Dechra Pharmaceuticals’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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three essential factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for DPH’s future growth? Take a look at our free research report of analyst consensus for DPH’s outlook.
Valuation: What is DPH 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 DPH 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.
