Is Boral Limited (ASX:BLD) A Smart Choice For Dividend Investors?

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, Boral Limited (ASX:BLD) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Does Boral tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Boral

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it the top 25% annual dividend yield payer?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

ASX:BLD Historical Dividend Yield Jun 5th 18

How well does Boral fit our criteria?

The current trailing twelve-month payout ratio for BLD is 99.21%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect BLD’s payout to fall into a more sustainable range of 61.30% of its earnings, which leads to a dividend yield of around 4.49%. In addition to this, EPS should increase to A$0.38, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from Boral fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, Boral generates a yield of 3.91%, which is high for Basic Materials stocks but still below the market’s top dividend payers.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Boral for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. I’ve put together three pertinent aspects you should further research:

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

2. Valuation: What is BLD 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 BLD 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.