How Does Universal Coal Plc (ASX:UNV) Fare As A Dividend Stock? – Simply Wall St

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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Universal Coal Plc (ASX:UNV) has returned an average dividend yield of 8.00% annually to shareholders. Does Universal Coal tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Universal Coal

5 checks you should do on a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is it paying an annual yield above 75% of dividend payers?
  • 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 its earnings sufficient to payout dividend at the current rate?
  • Will it have the ability to keep paying its dividends going forward?

ASX:UNV Historical Dividend Yield May 7th 18

How well does Universal Coal fit our criteria?

The current trailing twelve-month payout ratio for the stock is 69.21%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect UNV’s payout to fall to 29.22% of its earnings, which leads to a dividend yield of around 10.71%. However, EPS should increase to A$0.06, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Universal Coal as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether UNV one as a stable dividend player. Compared to its peers, Universal Coal produces a yield of 8.33%, which is high for Oil and Gas stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Universal Coal as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three essential factors you should further research:

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

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