Important news for shareholders and potential investors in Monsanto Company (NYSE:MON): The dividend payment of $0.54 per share will be distributed into shareholder on 27 April 2018, and the stock will begin trading ex-dividend at an earlier date, 05 April 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Monsanto’s most recent financial data to examine its dividend characteristics in more detail. View our latest analysis for Monsanto
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Monsanto fit our criteria?
Monsanto has a trailing twelve-month payout ratio of 39.61%, which means that the dividend is covered by earnings. Going forward, analysts expect MON’s payout to remain around the same level at 37.60% of its earnings, which leads to a dividend yield of around 2.01%. Furthermore, EPS should increase to $5.58. 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. In the case of MON it has increased its DPS from $0.7 to $2.16 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Relative to peers, Monsanto has a yield of 1.85%, which is on the low-side for Chemicals stocks.
Keeping in mind the dividend characteristics above, Monsanto is definitely worth considering for investors looking to build a dedicated income portfolio. 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. There are three relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for MON’s future growth? Take a look at our free research report of analyst consensus for MON’s outlook.
Valuation: What is MON 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 MON 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 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.