Today is Wednesday, August 14, 2019, and this is your daily dividend safety update. Today we’re looking at Switch (NYSE: SWCH) stock to see whether its 0.57% dividend is safe.
Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Switch has a payout ratio of 124.1%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
Switch has grown its cash flow by 106.1% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
Switch has not cut its dividend in the recent past. That’s a good sign. It’s not a guarantee that the company will never cut its dividend, but companies that have cut their dividends recently are generally more likely to cut them again.
Switch stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Switch. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.