Should You Buy Suncorp Group Limited (ASX:SUN) For Its Dividend?

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Suncorp Group Limited (ASX:SUN) has returned an average of 6.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Suncorp Group in more detail. Check out our latest analysis for Suncorp Group

Here’s how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

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

• Is is able to pay the current rate of dividends from its earnings?

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

ASX:SUN Historical Dividend Yield Jun 6th 18

Does Suncorp Group pass our checks?

The current trailing twelve-month payout ratio for SUN is 94.78%, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect SUN’s payout to fall into a more sustainable range of 77.46% of its earnings, which leads to a dividend yield of 5.55%. Furthermore, EPS should increase to A$0.84, 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 Suncorp Group 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, Suncorp Group produces a yield of 5.32%, which is high for Insurance stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Suncorp Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further examine:

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

2. Valuation: What is SUN 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 SUN 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.