Yahoo Finance Is Adelaide Brighton Limited (ASX:ABC) An Attractive Dividend Stock?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Adelaide Brighton Limited (ASX:ABC) has paid dividends to shareholders, and these days it yields 4.1%. Should it have a place in your portfolio? Let’s take a look at Adelaide Brighton in more detail.
See our latest analysis for Adelaide Brighton
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly 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 the company be able to keep paying dividend based on the future earnings growth?
How well does Adelaide Brighton fit our criteria?
The current trailing twelve-month payout ratio for the stock is 70.0%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 77.9%, leading to a dividend yield of 4.5%. Moreover, EPS should increase to A$0.33. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Adelaide Brighton generates a yield of 4.1%, which is high for Basic Materials stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, Adelaide Brighton ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for ABC’s future growth? Take a look at our free research report of analyst consensus for ABC’s outlook.
Valuation: What is ABC 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 ABC is currently mispriced by the market.
Other 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
