Yahoo Finance Read This Before Considering Amdocs Limited (NASDAQ:DOX) For Its Upcoming US$0.25 Dividend
Have you been keeping an eye on Amdocs Limited’s (NASDAQ:DOX) upcoming dividend of US$0.25 per share payable on the 19 October 2018? Then you only have 3 days left before the stock starts trading ex-dividend on the 27 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Amdocs’s latest financial data to analyse its dividend characteristics.
See our latest analysis for Amdocs
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is its annual yield among the top 25% of dividend-paying companies?
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?
Is its earnings sufficient to payout dividend at the current rate?
Will it be able to continue to payout at the current rate in the future?
How does Amdocs fare?
The current trailing twelve-month payout ratio for the stock is 32.3%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 25.6%, leading to a dividend yield of 1.6%. However, EPS should increase to $3.2, 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 business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Amdocs as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Amdocs has a yield of 1.5%, which is high for IT stocks but still below the market’s top dividend payers.
Next Steps:
If Amdocs is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer 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. There are three key factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for DOX’s future growth? Take a look at our free research report of analyst consensus for DOX’s outlook.
Valuation: What is DOX 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 DOX 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.
