Is SIG a bargain or is it too risky for investors?

Screening for companies with strong balance sheets and solid dividend yields can be a quick and simple way of identifying potentially high-quality investments that might be attractively priced. One way of doing might be to include stocks that have a Piotroski F-Score of 8 or 9 and a dividend yield of at least, say, 3%.

Take SIG (LON:SHI), for example, which is a mid cap adventurous super stock company in the Consumer Cyclicals sector. SIG pays out a rolling 3.00% of its share price in dividend payments.

Does SIG pass our F-Score test?

Stockopedia applies algorithms to its stream of financial data to automatically calculate the Piotroski F-Score for every stock on the market. It shows that Sig scores 8 out of a possible 9. 

By investing in companies scoring 8 or 9 by these measures, Piotroski showed that, over a 20-year test period through to 1996, the return earned by a value-focused investor could be increased by an astounding 7.5% each year. Even better, it suggests that the company is well-placed to continue to pay out attractive dividends.

Prospects for SIG

Perhaps we can see why this is by looking at the company's most recent financial results. For the fiscal year ended 31 December 2018, SIG plc revenues decreased 1% to £2.68bn but net income totaled £17.5m (vs a loss of £60.2m in the prior year).

SIG's improving financial condition, reasonable yield, and decent results justify further analysis, although it is worth noting the group's recent losses and exposure to cyclical construction factors.

What does this mean for potential investors?

SIG has an F-Score that suggests it could be a promising investment candidate worthy of further research - but it's only a first step. Higher F-Score stocks can still have weaknesses and may trade at premium prices compared to other stocks. We've identified some areas of concern with SIG that you can find out about here.