What To Know Before Buying Scentre Group (ASX:SCG) For Its Dividend

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Scentre Group (ASX:SCG) has returned to shareholders over the past 4 years, an average dividend yield of 5.00% annually. Should it have a place in your portfolio? Let’s take a look at Scentre Group in more detail. See our latest analysis for Scentre Group

5 checks you should do on a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has dividend per share risen in the past couple of years?

• Is it able 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?

ASX:SCG Historical Dividend Yield Jun 6th 18

Does Scentre Group pass our checks?

The current trailing twelve-month payout ratio for the stock is 27.37%, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. In the near future, analysts are predicting a higher payout ratio of 84.32%, leading to a dividend yield of 5.45%. However, EPS is forecasted to fall to A$0.27 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. 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 Scentre Group as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Scentre Group generates a yield of 5.21%, which is high for REITs stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then Scentre Group is a complicated choice since it has some positive aspects as well as negative ones. 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 important factors you should further research:

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

2. Valuation: What is SCG 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 SCG 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.