Outsourcing Inc passes these three dividend tests

Outsourcing Inc passes these three dividend tests

Article image

With tens of billions paid out in dividends across the stock market each year, it's no surprise that  investors pay close attention to the payouts from shares like Outsourcing Inc (TYO:2427). 

The return 'boost' from cash payouts is a crucial part of the total return you get from shares. And in volatile market conditions, these payouts are more important than ever.

But the challenge for investors is tracking down the best and most dependable dividends. With so many ways of assessing these payouts - and so many potential traps - it's important to focus on the most useful measures.

To help you find the best dividends possible, there are a few key measures to remember. Let's take a look at Outsourcing Inc as an example of what to look for.

1. High (but not excessive) dividend yield

Yield is an important dividend metric because it tells you the percentage of how much a company pays out in dividends each year relative to its share price. That makes it easy to compare dividend payouts right across the market.

High yields are obviously appealing but be careful of excessively high yields (usually above 10%) because they can be a sign of problems. When the market suspects a company may be unable to sustain its dividend, the share price will fall and actually push the yield higher - and this can be a trap. So it pays to be wary of excessive yields.

  • Outsourcing Inc is a player in the Professional & Commercial Services industry. It has a dividend yield of 4.12%.

2. Dividend growth

Another important marker for income investors is a track record of dividend growth - and evidence that the growth will continue. Consistent dividend growth can be a pointer to companies that are carefully managing their payout policies - and rewarding their shareholders over time. Rather than aggressively dishing out earnings, dividend growth companies tend to have more modest yields, but are better at sustaining their payouts.

  • Outsourcing Inc has increased its dividend payout 7 times over the past 10 years - and the dividend per share is forecast to grow by 16.0% in the coming year.

3. Dividend safety

Attractively high yields obviously turn heads - but it’s important to know that a dividend is affordable. Dividend Cover (similar to the payout ratio) is a go-to measure of a company's net income over the dividend paid to shareholders. It’s calculated as earnings per share divided by the dividend per share and helps to indicate how sustainable a dividend is.

Dividend cover of less than 1x suggests that the company can’t fund the payout from its current year earnings - and might be relying on other sources of funds to pay it.

  • Outsourcing Inc has dividend cover of 3.12.

What does this mean for potential investors?

Yield, Growth and Safety are the three main pillars that support some of the most popular dividend investing strategies. But it's important to know that dividend payouts can be cut or cancelled very quickly when the outlook changes.

To get a fuller understanding of the dividend prospects for any stock, it's important to do some investigation yourself. Indeed, we've identified areas of concern with Outsourcing that you can find out about here.


About us

Stockopedia helps individual investors make confident, profitable choices in the stock market. Our StockRank and factor investing toolbox unlocks institutional-quality insights into thousands of global stocks. Voted “Best Investment Research Tools” and “Best Research Service” at the 2021 UK Investor Magazine awards.

Outsourcing's StockRank™

NeutralSpeculative

Outsourcing's StockRank™

With a StockRank of 73, Outsourcing is more attractive than 73% of the 14,659 stocks we cover in Asia, according to our proprietary ranking system.

See the full StockReport

Absolutely Perfect

"Trialed multiple other platforms - this is by far my favourite. Other platforms do not even have half the stuff that you can find on Stockopedia. Love it!"

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.