A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Arrow Financial Corporation (NASDAQ:AROW) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Arrow Financial should have a place in your portfolio.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- 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?
- 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?
Does Arrow Financial pass our checks?
The current trailing twelve-month payout ratio for the stock is 40.99%, which means that the dividend is 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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of AROW it has increased its DPS from $0.80 to $1.04 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Arrow Financial generates a yield of 2.60%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank Arrow Financial as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for AROW’s future growth? Take a look at our free research report of analyst consensus for AROW’s outlook.
- Valuation: What is AROW 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 AROW 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 email@example.com.