A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. The PAS Group Limited (ASX:PGR) has returned to shareholders over the past 3 years, an average dividend yield of 8.00% annually. Let’s dig deeper into whether PAS Group should have a place in your portfolio. Check out our latest analysis for PAS Group
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
-
Is their annual yield among the top 25% of dividend payers?
-
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
-
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 well does PAS Group fit our criteria?
The company currently pays out 70.44% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. 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. The reality is that it is too early to consider PAS Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, PAS Group has a yield of 7.50%, which is high for Specialty Retail stocks.
Next Steps:
Taking all the above into account, PAS Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 look at:
-
Valuation: What is PGR 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 PGR is currently mispriced by the market.
-
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on PAS Group’s board and the CEO’s back ground.
-
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.