Is ASX Limited (ASX:ASX) A Great Dividend Stock?

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, ASX Limited (ASX:ASX) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Does ASX tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for ASX

How I analyze 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 amount increased over the past?

• 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?

ASX:ASX Historical Dividend Yield June 24th 18

How does ASX fare?

The company currently pays out 89.94% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 89.66%, leading to a dividend yield of 3.50%. Moreover, EPS should increase to A$2.45.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although ASX’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, ASX generates a yield of 3.21%, which is on the low-side for Capital Markets stocks.

Next Steps:

With this in mind, I definitely rank ASX as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 fundamental factors you should further research:

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

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

3. 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 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.