Yahoo Movies Only 4 Days Left Until Arcos Dorados Holdings Inc (NYSE:ARCO) Trades Ex-Dividend,
Investors who want to cash in on Arcos Dorados Holdings Inc’s (NYSE:ARCO) upcoming dividend of US$0.05 per share have only 4 days left to buy the shares before its ex-dividend date, 01 October 2018, in time for dividends payable on the 05 October 2018. Is this future income a persuasive enough catalyst for investors to think about Arcos Dorados Holdings as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
Check out our latest analysis for Arcos Dorados Holdings
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it paying an annual yield above 75% of dividend payers?
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?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Arcos Dorados Holdings pass our checks?
The company currently pays out 22.4% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 31.5%, leading to a dividend yield of 2.3%. However, EPS is forecasted to fall to $0.36 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Arcos Dorados Holdings as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Arcos Dorados Holdings generates a yield of 1.6%, which is on the low-side for Hospitality stocks.
Next Steps:
Whilst there are few things you may like about Arcos Dorados Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, 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 fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for ARCO’s future growth? Take a look at our free research report of analyst consensus for ARCO’s outlook.
Valuation: What is ARCO 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 ARCO 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.
