If you are interested in cashing in on CF Industries Holdings Inc’s (NYSE:CF) upcoming dividend of US$0.30 per share, you only have 2 days left to buy the shares before its ex-dividend date, 14 August 2018, in time for dividends payable on the 31 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine CF Industries Holdings’s latest financial data to analyse its dividend characteristics.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does CF Industries Holdings fare?
The company currently pays out 47.64% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CF’s payout to increase to 55.86% of its earnings, which leads to a dividend yield of around 2.53%. However, EPS is forecasted to fall to $1.68 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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. CF has increased its DPS from $0.080 to $1.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes CF a true dividend rockstar.
Compared to its peers, CF Industries Holdings has a yield of 2.41%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, CF Industries Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CF’s future growth? Take a look at our free research report of analyst consensus for CF’s outlook.
- Valuation: What is CF 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 CF 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.