Does Aurizon Holdings Limited (ASX:AZJ) Have A Place In Your Portfolio?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 8 years, Aurizon Holdings Limited (ASX:AZJ) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Aurizon Holdings should have a place in your portfolio. See our latest analysis for Aurizon Holdings

5 questions to ask before buying 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?

• 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?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

ASX:AZJ Historical Dividend Yield Jun 5th 18

How does Aurizon Holdings fare?

Aurizon Holdings has a negative payout ratio, which means that it is loss-making, and paying its dividend from its retained earnings. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Aurizon Holdings as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Aurizon Holdings produces a yield of 5.29%, which is high for Transportation 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 Aurizon Holdings 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, 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 important factors you should further research:

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

2. Valuation: What is AZJ 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 AZJ 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.