Yahoo Finance Should Computershare Limited (ASX:CPU) Be Part Of Your Dividend Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Computershare Limited (ASX:CPU) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Does Computershare tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Computershare
How I analyze 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 the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Computershare fare?
The current trailing twelve-month payout ratio for the stock is 57.26%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 46.92%, leading to a dividend yield of around 2.57%. However, EPS should increase to $0.63, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of CPU it has increased its DPS from $0.2 to $0.38 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes CPU a true dividend rockstar. In terms of its peers, Computershare has a yield of 2.17%, which is high for IT stocks but still below the low risk savings rate.
Next Steps:
Considering the dividend attributes we analyzed above, Computershare is definitely worth keeping an eye on for someone looking to build a dedicated income 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. Below, I’ve compiled three relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CPU’s future growth? Take a look at our free research report of analyst consensus for CPU’s outlook.
Valuation: What is CPU 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 CPU 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 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.
