Yahoo Finance Consider This Before Buying Johns Lyng Group Limited (ASX:JLG) For The 1.5% Dividend
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Johns Lyng Group Limited (ASX:JLG) has begun paying dividends recently. It now yields 1.5%. Let’s dig deeper into whether Johns Lyng Group should have a place in your portfolio.
View our latest analysis for Johns Lyng Group
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?
Has it paid dividend every year without dramatically reducing payout in the past?
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?
How does Johns Lyng Group fare?
Johns Lyng Group has a trailing twelve-month payout ratio of 36%, which means that the dividend is covered by earnings. Going forward, analysts expect JLG’s payout to increase to 54% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.3%. In addition to this, EPS should increase to A$0.054. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Johns Lyng Group as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether JLG one as a stable dividend player.
In terms of its peers, Johns Lyng Group generates a yield of 1.5%, which is on the low-side for Construction stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Johns Lyng Group 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. Below, I’ve compiled three pertinent aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for JLG’s future growth? Take a look at our free research report of analyst consensus for JLG’s outlook.
Valuation: What is JLG 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 JLG is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
