Is Diploma PLC (LON:DPLM) A Smart Choice For Dividend Investors?

Over the past 10 years Diploma PLC (LON:DPLM) has returned an average of 3.00% per year from dividend payouts. The company is currently worth UK£1.40b, and now yields roughly 1.91%. Let’s dig deeper into whether Diploma should have a place in your portfolio. Check out our latest analysis for Diploma

5 checks you should do on a dividend stock

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

• Is it the top 25% annual dividend yield payer?

• 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 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?

LSE:DPLM Historical Dividend Yield June 23rd 18

How does Diploma fare?

The current trailing twelve-month payout ratio for the stock is 53.85%, which means that the dividend is covered by earnings. Going forward, analysts expect DPLM’s payout to remain around the same level at 49.06% of its earnings, which leads to a dividend yield of 2.24%. Furthermore, EPS should increase to £0.57.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. DPLM has increased its DPS from £0.061 to £0.24 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, Diploma generates a yield of 1.91%, which is on the low-side for Trade Distributors stocks.

Next Steps:

Taking into account the dividend metrics, Diploma 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. I’ve put together three important aspects you should look at:

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

2. Valuation: What is DPLM 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 DPLM is currently mispriced by the market.

3. 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 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.