Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Tassal Group Limited (ASX:TGR) has paid a dividend to shareholders. It currently yields 3.7%. Should it have a place in your portfolio? Let’s take a look at Tassal Group in more detail.
5 questions to ask before buying 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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- 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?
Does Tassal Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 48%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 53% which, assuming the share price stays the same, leads to a dividend yield of around 4.5%. Moreover, EPS should increase to A$0.34. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider 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. Although TGR’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Tassal Group generates a yield of 3.7%, which is high for Food stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Tassal Group 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for TGR’s future growth? Take a look at our free research report of analyst consensus for TGR’s outlook.
- Valuation: What is TGR 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 TGR 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.