Yahoo Finance Should American Railcar Industries Inc (NASDAQ:ARII) Be Part Of Your Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, American Railcar Industries Inc (NASDAQ:ARII) has been paying a dividend to shareholders. Today it yields 3.5%. Should it have a place in your portfolio? Let’s take a look at American Railcar Industries in more detail.
See our latest analysis for American Railcar Industries
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Is is able 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 American Railcar Industries fit our criteria?
The current trailing twelve-month payout ratio for the stock is 21%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although ARII’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, American Railcar Industries generates a yield of 3.5%, which is high for Machinery stocks.
Next Steps:
Taking into account the dividend metrics, American Railcar Industries 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. I’ve put together three pertinent factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for ARII’s future growth? Take a look at our free research report of analyst consensus for ARII’s outlook.
Valuation: What is ARII 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 ARII 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.
