The IC Alpha dividend diamond screen hasn’t altered too much over the past month but the subtle changes offer investors food for thought when it comes to some of the companies that have previously scored well.
In the FTSE All Share screen, only plastics manufacturer RPC Group (RPC) still passes all eight tests. Recruiter Page Group (PAGE) and engineering firm Costain (COST) only pass seven tests now, with both companies falling short on the cash conversion test.
In the case of Page Group, which has had strong share price momentum all year, this is the second of our Alpha screens (the other being our GARP screen in July) where it no longer scores perfectly. Screens are not a signal to sell a stock but they are certainly a starting point to periodically re-examine an investment case, which is a good discipline for stocks with cyclical characteristics.
Our FTSE Small Companies screen sees little change and no companies score perfectly. Shifting attention to Aim, the Property Franchise Group (TPFG), Park Group (PKG) and Fulcrum Utility Services (FCRM) still get perfect marks against the screen.
MTI Wireless Edge (MWE) no longer passes all 8 Aim tests, however. It now fails our interest cover test – which assesses how well interest obligations are covered by operating profits and is an indicator of the sustainability of a company’s dividend. This doesn’t mean the dividend is under imminent threat but again provides a signal to examine whether pay-outs are funded from operations.
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