Yahoo Finance Is SGS SA (VTX:SGSN) A Smart Pick For Income Investors?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, SGS SA (VTX:SGSN) has been paying a dividend to shareholders. Today it yields 3.0%. Does SGS tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for SGS
5 questions I ask before picking 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 dividend per share risen in the past couple of years?
Can it afford to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does SGS fit our criteria?
SGS has a trailing twelve-month payout ratio of 91.8%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect SGSN’s payout to fall into a more sustainable range of 77.0% of its earnings, which leads to a dividend yield of 3.3%. Moreover, EPS should increase to CHF96.19, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. In the case of SGSN it has increased its DPS from CHF25 to CHF75 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes SGSN a true dividend rockstar.
Relative to peers, SGS has a yield of 3.0%, which is high for Professional Services stocks but still below the market’s top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, SGS is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for SGSN’s future growth? Take a look at our free research report of analyst consensus for SGSN’s outlook.
Valuation: What is SGSN 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 SGSN is currently mispriced by the market.
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 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.
