Is Abacus Property Group (ASX:ABP) A Great Dividend Stock?

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the past 10 years Abacus Property Group (ASX:ABP) has returned an average of 9.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Abacus Property Group should have a place in your portfolio. See our latest analysis for Abacus Property Group

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

ASX:ABP Historical Dividend Yield May 26th 18

How does Abacus Property Group fare?

Abacus Property Group has a trailing twelve-month payout ratio of 48.45%, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. Going forward, analysts expect ABP’s payout to increase to 58.93% of its earnings, which leads to a dividend yield of 4.84%. However, EPS is forecasted to fall to A$0.36 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Dividend payments from Abacus Property Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, Abacus Property Group generates a yield of 4.70%, which is on the low-side for REITs stocks.

Next Steps:

If Abacus Property Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for ABP’s future growth? Take a look at our free research report of analyst consensus for ABP’s outlook.

2. Valuation: What is ABP 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 ABP is currently mispriced by the market.

3. 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 pass 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.